CONTROL OF THE MARKET 



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BRUCE WYMAN 



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CONTROL OF THE MARKET 

A 
Legal Solution of the Trust Problem 



CONTROL OF the MARKET 

A 
LEGAL SOLUTION of the TRUST PROBLEM 

BY 

BRUCE WYMAN, a.M.,ll.B. 

M 

Professor of Law in Harvard University and 
Lecturer in the Department of Economics 




NEW YORK 
MOFFAT, YARD AND COMPANY 

1911 



.W9T 



Copyright, 1911, by 

BRUCE WYMAN 

All Rights Reserved 



Published, October, 1911 






v 



©CIA303230 



CONTENTS 

CHAPTER PAGE 

I. Tendencies Toward State Control . 1 

II. Freedom for Fair Competition . 

III. Types of Unfair Competition 

IV. Coercion by Labor Unions . 
V. Pressure by Trade Combinations 

VI. Contracts in Restraint of Trade 
VII. Modern Forms of Combination . 



VIII. Businesses Affected with a Public 
Interest ..... 



10 
36 
58 
88 
117 
142 



167 

IX. Unfair Practices in Public Callings 190 

X. Enforcement of the Anti-Trust 

Statute . . . . . .214 

XL Relief Against Pred itory Competition 242 

XII. Extent of State Control . . . 268 

Table of Cases Discussed . . . 279 



PREFACE 

I have been advocating for many years the 
regulation of the trusts by law, rather than 
the persistence in the attempt to destroy 
by law these aggregations of capital. For I 
have come to believe in the control by the 
State of all businesses which have outgrown 
the regulation of competition. I do not mean 
by this that the State should undertake to 
order the conduct of all businesses, which it 
is apparent would be one form of socialism. 
Regulation of this extreme sort will be con- 
fined to those businesses which are affected 
with a public interest. But it seems certain 
that other businesses than those now within 
this classification will eventually be brought 
within it. And the thesis will be defended 
in these pages that all businesses which 
have a virtual monopoly, firmly established 
in the nature of things, are so affected with 
a public interest as to be within the class 
of callings which are considered public em- 
ployments. What branches of industry will 



vi PREFACE 

eventually be considered of such public im- 
portance as to be included within the cate- 
gory of public callings, it would be rash 
to predict. But no one can study the 
authorities on this subject without feeling 
their great potentialities. In private busi- 
nesses, one may sell or not as one pleases, 
manufacture what qualities one chooses, de- 
mand any price that can be gotten, and give 
any rebates that are advantageous. It is 
because the modern trusts are carrying on a 
predatory competition under the cover of 
this law that we have the trust problem. 
All this time in public businesses one must 
serve all that apply without exclusive condi- 
tions, provide adequate facilities to meet all 
the demands of the consumer, exact only rea- 
sonable charges for the services that are ren- 
dered, and between customers under similar 
circumstances make no discriminations. If 
this law might be enforced against the trusts, 
perhaps a solution of the problem would be 
found. The immediate extension of this coer- 
cive law of public employment to cotf er the in- 
dustrial trusts, I have been urging incidentally 
in various writings for sonic time. And it is 
fitting that I should acknowledge in this place 
the courtesy of the Boston Book Co., in 



PREFACE vii 

permitting me to reprint certain articles 
of mine in the Green Bag, and the kindness 
of Baker, Voorhis & Co., in allowing me to 
take what I pleased from my recent treatise 
on Public Service Corporations. 

B. W. 



CHAPTER I 

TENDENCIES TOWARD STATE CONTROL 



It has been remarked many times that our 
common law, by which we are so largely 
governed, may be relied upon to meet, by the 
continual development of its fundamental 
principles, the complex conditions created 
by the constant evolution in the industrial 
organization. This continual development in 
the common law is largely the result of the 
progressive changes in public opinion. The 
mere talk of the day has little effect upon the 
making of the law ; for the law, as established, 
has too much inertia to be thus moved. But 
the seasoned opinion of a given era soon be- 
comes the law of that period; for the judges 
usually have the same general ideas as other 
enlightened persons. Not only are they in- 
spired with the same beliefs, but they have 
the power to insist that other men shall act 
according to their notions of social justice. 
Whenever the mass of men firmly believe that 



2 THE CONTROL OF THE MARKET 

approximation to certain ideals is necessary 
for their salvation, these policies will almost 
always be found to have become fundamental 
principles of the law. 



ii 

The underlying causes of most of the 
changes in the law are really economic. Men 
suffer from the conditions of the time; and 
they look to the law to save them from their 
fate. That men are prone to hope too much 
from changes in the law is clear ; but it is 
none the less true that they generally appeal 
to it as to a higher power. The current be- 
lief in all times is that if almost all men 
could be compelled to act as the great ma- 
jority think they ought, there would be as 
near an approximation to perfection at any 
given time as is possible in that period of 
human progress. This notion has been the 
real support of all governments which have 
had any permanence since society began; for 
no constituted authority lasts long which is 
not responsive to public opinion to some 
degree. 

From the earliest times some restraint 
has been exercised over all lines of industry 



TENDENCIES TOWARD STATE CONTROL 3 

which are of vital interest to the public. The 
establishment of the peace, the protection of 
the weak against the physical violence of the 
strong, is a fundamental function of govern- 
ment; but of equal importance and of almost 
equal antiquity is the protection of the com- 
mon people against the greed and oppres- 
sion of the powerful. This is what public 
opinion has always demanded of the state, 
that it shall protect equally against physical 
violence and against oppression that affects 
the means of living. We get as much protec- 
tion from the law as the enlightened persons 
of a given time believe we ought to have 
from it — no more, no less. 

The modern lawyer, who accepts unre- 
servedly the evolutionary theory of the 
growth of the law, is as ready as those of 
the older time, who believed in the eternal 
principles of natural justice, to begin his 
investigation of a legal doctrine in the earliest 
reports of adjudicated cases. A view of the 
whole course of our law upon a particular 
subject is as necessary now for those who 
hope at most to predict what the law is likely 
to be as for those who once expected to dis- 
cover what the law had always been from 
time immemorial. The eternal conflict be- 



4 THE CONTROL OF THE MARKET 

tween competition and combination is always 
bringing cases to the courts for decision. 
Thus we may know from age to age what 
were the policies which were currently be- 
lieved in ; and so we may predict, with more 
confidence, what the law will be in the future, 
knowing what its course has been in the past. 



in 

The irresistible advances of the modern 
competitive system gradually worked the 
destruction of the mediaeval organization of 
industry. Great, however, as was this change 
from the old economic theory to the new, it 
was gradual, and it was never complete. 
There was a swing of the pendulum. General 
but not absolute restriction of freedom of 
trade was the policy of the Middle Ages; 
general freedom of trade with the restriction 
of certain exceptional occupations has become 
the policy of modern times. Generally speak- 
ing, a state of free competition has been for 
several centuries now considered to be for the 
best interests of society; and, therefore, in 
modern times almost every business has been 
opened to almost every man. But at all times 
in economic history, both restriction and free- 



TENDENCIES TOWARD STATE CONTROL 5 

dom are to be found in the law, the propor- 
tion, however, changing greatly. In one 
epoch there is much legal limitation, with 
little freedom left; in another age there is 
almost universal competition, with some little 
regulation to be found. And the rule will 
generally hold true that the more the natural 
laws of competition regulate service and 
price, the less the State need interfere in 
these respects; but, conversely, when com- 
petition ceases to act efficiently, state con- 
trol becomes necessary. 

As a result of the economic evolution from 
mediaeval times to the present day, there have 
come into being in the last generation a con- 
siderable number of employments which have 
gained, if not a legal monopoly, at any rate, 
as a result of circumstances, a virtual monop- 
oly in matters of public necessity. The law 
is the only protection that the public can have 
in a situation such as this, where there is no 
competition among the sellers to operate in 
its favor. So much has our philosophy been 
permeated with the theory of laissez faire, 
which was but lately so prominent in the 
policy of our state, that the admission has 
been made with much hesitation that State 
control is ever necessary. But the modern 



6 THE CONTROL OF THE MARKET 

conclusion, after some bitter experience, is 
that freedom can be allowed only where con- 
ditions of virtual competition prevail; for 
where there is monopoly without stern re- 
strictions, there is always great mischief. 

It is almost a truism that the spirit of the 
age molds its law. Those who make the laws 
are members of the community and share its 
spirit. The age's ideal of right is their ideal, 
the method of thought about justice which 
is prevalent at the time is their method of 
thought, too; and it therefore follows that in 
working out legal problems, the lawmakers 
work along the lines prescribed by the spirit 
of the age in which they live. Nowhere is 
the influence of the spirit of the time on the 
common law more evident and more potent 
than in this question of the regulation of 
business dealings. When monopoly prevails, 
the people call upon the law to save them. 
When competition is the usual thing, people 
speak disparagingly of the law. 



IV 

While State regulation is the prevailing 
philosophy of the people at the beginning of 
the twentieth century, it must be borne in 



/ 



TENDENCIES TOWARD STATE CONTROL 7 

mind that this has been the result of a gradual 
progress of thought, and that this progress 
has not affected all men equally. Now, as at 
all times, there are conservatives and radicals, 
the former as far behind the prevailing spirit 
of the time as the latter go beyond it. In 
every change of popular thought there have 
been those who have been unable to appre- 
ciate the change; and in every such change 
there have been those who are unable justly 
to estimate the true meaning of the change. 
We have, indeed, three general types of 
thought at every time: the conservatives, the 
moderates, and the radicals. Many persons 
still hold conservative views as to the appli- 
cation of the law regulating monopoly to 
modern conditions. They believe that the 
conductors of every business, however neces- 
sary to public welfare, should do whatever 
seems good in their own eyes. Others, thor- 
oughly radical, believe that the State should 
take entire control of the whole situation. 
But, as usually happens, the moderates hold 
the balance of power with their policy of 
State regulation only in so far as it may be 
found to be necessary. 

Undoubtedly, therefore, the spirit of our 
present age demands that the great business 



8 THE CONTROL OF THE MARKET 

enterprises shall be conducted in accordance 
with the requirements of society. The present 
programme of organized society is to see 
to it that those who have gained a substantial 
control of their market shall not be left free 
to exploit those who look to them to supply 
their needs. Men now see clearly that free- 
dom of action may, even in the industrial 
world, work injuriously for the public, and 
it must then be restrained in the public in- 
terest. We have seen the results of unre- 
strained power; and we no longer wish those 
who have control of our destinies left free 
to do with us as they please. Liberty does 
not mean to men at the beginning of the 
twentieth century what it meant to men at 
the beginning of the nineteenth century. 

No one can carefully study the authorities 
on this subject without feeling that we are 
just entering upon a great and important 
development of the common law. What 
branches of industry will eventually be of 
such public importance as to be included in 
the category of public concerns, and to what 
extent the control of the courts will be carried 
in the effort to solve, by law, the modern 
economic problems, it would be rash to pre- 
dict. Enormous business combinations, vir- 



TENDENCIES TOWARD STATE CONTROL 9 

tual monopolization of the necessaries of life, 
the strife of labor and capital, now the con- 
cern of the economist and the statesman, may 
prove susceptible of legal control through the 
doctrines of this special law. General doc- 
trines have been established; and upon this 
successful working out depends, to a large 
extent, the future economic organization of 
the country. Only if the courts can ade- 
quately control the established monopolies 
in all contingencies may the business of these 
concerns be left in private hands. 



CHAPTER II 

tEEDOM FOR FAIR COMPETITION 



In any consideration of industrial prob- 
lems we are confronted by the long estab- 
lished condition of free competition, and the 
still unquestionable desire for its continued 
maintenance. Even in these present days of 
elimination of competition by combination, 
the public policy for free competition is 
asserted often as vehemently as ever. For 
the most of men still believe, and the most 
of judges with them, that by the natural 
processes of free competition men find their 
highest development. Of course, there are 
opposed to an absolutely free competition 
in fact the natural barriers which necessarily 
accompany an industrial organization. To 
such social limitations men may submit them- 
selves, however unwillingly; but in modern 
times legal restriction to individual advance- 
ment would not be endured in ordinary 
businesses. The final justification of the in- 



10 



FREEDOM FOR FAIR COMPETITION 11 

evitable losses, which free competition un- 
fortunately involves, is to be found in this 
well founded opinion, that fundamental limi- 
tations upon free competition are not only 
wholly impractical, but wholly incompatible 
with individual liberty. 



II 

That this is all a matter of current opinion 
may be established by showing that other 
views were formerly expressed quite as 
confidently by the courts of law. In the 
mediaeval system as we see it in our earliest 
law reports, restriction of competition was 
the prevalent doctrine. It was conceived 
that it was better both for producer and 
consumer to have a special position in the 
economic order assigned to every man. 
Each man had a right to his place in the 
established order according to his rank, with 
its corresponding duty. So long as this con- 
dition of affairs gave satisfaction to the most 
of men, it received the support of the most 
of courts. 

These special rights in special businesses 
met one at every turn in mediaeval trade 
and business. Almost all the crafts and 



12 THE CONTROL OF THE MARKET 

manufactures were parceled out by special 
franchises to various guilds and fraternities, 
each of which had exclusive right in its own 
field. So local trading and distant commerce 
were in the hands of the guilds merchant and 
trading companies, each with an extensive 
monopoly by its original constitution. The 
same arrangements ordered activities within 
the manor. The course of husbandry and 
the rotation of the crops were regulated by 
an established system. The incidental serv- 
ices, like those of baker, miller, farrier and 
butcher, were provided for by exclusive 
franchises. Markets and fairs were estab- 
lished for the sale of products and legally 
protected, so that none might barter his goods 
elsewhere during those periods. And, of 
course, hunting and fishing were preserved 
and reserved. 

Times change, however, and the laws 
with them; when the doctrines of the 
Renaissance became current, men were no 
longer content with the older restrictions 
which so hampered the advancement of the 
individual. So far as one case can evidence it, 
the turning point in our law was the School- 
masters' Case in 1410 (Y. B. 11 Hen. IV. 
47, 21). The masters of a grammar school 



FREEDOM FOR FAIR COMPETITION 13 

of Gloucester brought a writ of trespass 
against another master, and counted that 
the defendant had started a school in the 
same town, so that whereas the plaintiffs 
had formerly received 40d. a quarter from 
each child, now they only got 12d. to their 
damage. The counsel for plaintiffs con- 
tended that this interference shown and this 
damage proved made a good action on the 
case; he cited many instances of exclusive 
rights, including the claim of the masters 
of Paul's that there should be no other mas- 
ters in all London except themselves. But 
Justice Hill said that there was no ground 
to maintain this action, since the plaintiffs 
had no estate, but a ministry for the time; 
and though another equally competent with 
the plaintiffs came to teach the children, " this 
was a virtuous and charitable thing, and an 
ease to the people, for which he could not be 
punished by the law." 

This was not accepted as good law with- 
out a struggle. A generation later in the 
case of the Prior of Nedeport ( Y. B. 22 Hen. 
VI. 14 b) we have a long and heated argu- 
ment between counsel and court over a writ 
claiming damages for the injury done to the 
business of the mill of the prior by the estab- 



14 THE CONTROL OF THE MARKET 

lishment of a mill by another party without 
authority. Finally Justice Newton disposed 
of the argument for the plaintiff by putting 
supposititious cases. He concluded with this: 
Let us suppose that there is a freeholder in 
a certain vill who is making large profits by 
using his lands for pasturing cattle, and then 
another turns his arable land into pastures, 
thereby getting from the inhabitants the 
agisting of many beasts, will there be a 
remedy for the first landowner? " Clearly 
not; for it is lawful for an owner to 
make the best profit he can from his 
land." 

Not only did these cases establish for the 
future, beyond all doubt, that competition 
was to be free unless an exclusive franchise 
had been granted in explicit terms, but they 
declared, with the high hope of new enthu- 
siasm, that free competition was altogether 
beneficial. After some centuries of experi- 
ence, such indiscriminate praise, it may be, 
would not be given the competitive system. 
It has been found out that the competitive 
regime along with its good results has brought 
deplorable injustices, even to meritorious in- 
dividuals. But there are few persons, not- 
withstanding this, who would assert that any 



FREEDOM FOR FAIR COMPETITION 15 

practicable method of ordering human affairs 
would produce better results. 



in 

And, indeed, this belief in free competition 
is so fundamental in modern opinion that 
the issue is hardly to be found in litigation 
in modern books. As a usual thing it is only 
incidentally that the question comes up, as 
in Allen v. Flood (1898 A. C. 1) , where Lord 
James of Hereford supposes this case: An 
architect seeks to be employed to the exclu- 
sion of his rivals. He says: "My plans are 
the best, and following them will produce the 
best house at the least cost. Therefore, em- 
ply me and not A. or B." Can this rival 
sue? His Lordship says not, clearly: " Be- 
fore discussing the question it is necessary 
that some definition of the words ' interfered 
with ' in their legal sense should be given. 
Every man's business is liable to be ' inter- 
fered with ' by the action of another, and yet 
no action lies for such interference. Competi- 
tion represents ' interference/ and yet it is 
in the interest of the community that it should 
exist. A new invention utterly ousting an 
old trade would certainly ' interfere with ' it. 



16 THE CONTROL OF THE MARKET 

If, too, this loose language is to be held to 
represent a legal definition of liability, very 
grave consequences would follow." 

Again, in Vegelahn v. Guntner (167 Mass. 
92), Mr. Justice Holmes propounds by way 
of illustration the case of rival shopkeepers, 
a new man endeavoring to drive the old man 
out of business. The town, he supposes, is 
too small to support more than one, and the 
new man succeeds in getting all the business 
of his rival within a short time. Yet it is the 
necessary decision that no legal wrong is 
done: "The reason, of course, is that the 
doctrine generally has been accepted that 
free competition is worth more to society 
than it costs, and that on this ground the 
infliction of the damage is privileged. Yet 
even this proposition nowadays is disputed 
by a considerable body of persons, includ- 
ing many whose intelligence is not to be 
denied, little as we may agree with them. 
I have chosen this illustration partly with 
reference to what I have to say next. It 
shows without the need of further authority 
that the policy of allowing free competition 
justifies the intentional inflicting of tem- 
poral damage, including the damage of in- 
terference with a man's business, by some 



FREEDOM FOR FAIR COMPETITION 17 

means, when the damage is done not for its 
own sake, but as an instrumentality in reach- 
ing the end of victory in the battle of trade.'' 



IV 

It is not altogether impossible to find cases 
where the decision turns upon the fact that 
what is complained of is nothing more than 
mere competition; for a judge will sometimes 
find it a convenient method of disposing of 
a case to reduce it thus to simplest terms. 
In Snowden v. Noah (Hopkins Ch. 351), 
for example, an injunction asked by the pur- 
chaser of a newspaper property to prevent 
the former editor, who had set up a new 
journal, from getting away his subscribers 
was refused, Chancellor Hopkins saying: 
" The business of printing and publishing 
newspapers, being equally free to all, the loss 
to one newspaper establishment, which may 
follow from the competition of any rival 
establishment, is merely a consequence of 
the freedom of this competition, and gives 
no claim to legal redress." 

An interesting case, involving much the 
same point, was Ayer v. Rushton (7 Daly 
9). The proprietors of Ayer's "Cherry 



18 THE CONTROL OF THE MARKET 

Pectoral " sought to enjoin Rushton & Co., 
an enterprising firm of druggists, who were 
compounding a " Cherry Pectoral " of their 
own. Conspicuously placed in the windows 
were placards with the words, " Ayer's 
Cherry Pectoral, one dollar — Rushton's 
Cherry Pectoral, fifty cents — Which will you 
have?" Rushton's clerks were carefully in- 
structed to ask persons inquiring for Cherry 
Pectoral which they wanted, " Rushton's " or 
" Ayer's," and to say that " Rushton's " was 
much better, although they had both in stock. 
On this evidence the court, of course, could 
find nothing but fair competition, as every 
effort had been made to distinguish the 
preparations for the purpose of inducing 
customers to buy Rushton's Pectoral instead 
of Ayer's. 



Another way in which the question comes 
up is when a person who has been damaged 
by the construction of the works for a com- 
peting business claims that he is one of the 
persons who should have compensation, 
reparation having been provided for in some 
general way. Thus in Hopkins V. Great 
Northern Railway (L. R. 2 Q. B. D. 224), 



FREEDOM FOR FAIR COMPETITION 19 

the proprietor of a ferry sued the railway 
company for damage caused to his business 
by the construction of the railway bridge 
across the river, which diverted travel from 
his ferry. Lord Justice Mellish held that 
the complainants were not entitled to any- 
thing: " If owners of ferries are held entitled 
to compensation, they will certainly form a 
singular exception to all other persons who 
were the owners of highways, or had a legal 
interest in the profits to be derived from the 
use of highways before railways were in- 
vented. It can hardly be necessary to 
enumerate the different classes of persons 
who had a legal interest in the old highways, 
and who have suffered loss from the diversion 
of traffic from those highways to railways: 
proprietors of canals, turnpike trustees, hold- 
ers of turnpike bonds, trustees of river navi- 
gations, and holders of bonds secured on their 
tolls, have all suffered great losses from 
the diversion of traffic to railways and have 
received no compensation. No doubt their 
rights have not been infringed, though their 
property has been affected." 

There are several cases, also, where the 
grantees of a franchise have brought suit 
against those who are damaging their in- 



20 THE CONTROL OF THE MARKET 

terests by conducting a competing business 
in which the courts, upon the strictest con- 
struction of the franchise, have held that 
this particular kind of competition was not 
in violation of the franchise, and therefore 
have dismissed the suit, since nothing but 
mere competition remained as the basis of 
the complaint. Such were substantially the 
facts in Illinois and Michigan Canal v. 
Chicago and Rock Island Railroad (14 111. 
314), where a canal company complained of 
the interference with its business by the 
construction of a railroad paralleling it. In 
discussing the case, Mr. Justice Caton said: 
" Who shall anticipate the new methods of 
intercommunication which the ingenuity of 
this wonderful age may devise, or the im- 
provements which may be made in the old? 
Who can set bounds to the wants in this 
respect which new developments may sug- 
gest? And shall we imply and intend, even 
with the aid of the most liberal rule of con- 
struction, that the legislature designed to sur- 
render the right to allow the people to avail 
themselves of improved modes of communica- 
tion or commerce?" 



FREEDOM FOR FAIR COMPETITION 21 

VI 

It would seem that the right to cut prices, 
whatever damage may result to competitors, 
is a fundamental privilege in competition. 
In the very important case of the Mogul 
Steamship Company v. McGregor (L. R. 23 
Q. B. D. 598), one of the matters of which 
the tramp steamship owners complained was 
that the regular steamship companies sent 
additional ships to Hankow and smashed 
freights, in order to ruin them or drive them 
from the field. In holding that this con- 
stituted no legal wrong Lord Justice Bo wen 
said: " It would impose a novel fetter upon 
trade. The defendants, we are told by the 
plaintiffs' counsel, might lawfully lower rates, 
provided they did not lower them beyond a 
' fair freight,' whatever that may mean. But 
where is it established that there is any such 
restriction upon commerce? And what is to 
be the definition of a ' fair freight ' ? It is 
said that it ought to be a normal rate of 
freight, such as is reasonably remunerative to 
the shipowner. But over what period of time 
is the average of this reasonable remunera- 
tiveness to be calculated? All commercial 
men with capital are acquainted with the 



22 THE CONTROL OF THE MARKET 

ordinary expedient of sowing one year a 
crop of apparently unfruitful prices, in 
order by driving competition away to reap 
a fuller harvest of profit in the future; and 
until the present argument at the bar it 
may be doubted whether shipowners or 
merchants were ever deemed to be bound by 
law to conform to some imaginary ' normal ' 
standard of freights or prices, or that law 
courts had a right to say to them in respect 
of their competitive tariffs, ' Thus far shalt 
thou go, and no further.' To attempt to 
limit English competition in this way would 
probably be as hopeless an endeavor as the 
experiment of King Canute." 

Undoubtedly the excellent opinion just 
quoted represents the law everywhere. All 
that there is against it is an interesting 
dictum in Averrill v. Southern Railway (75 
Fed. Rep. 736), where the receiver of a rail- 
way filed a bill asking the aid of the court 
in protecting the property against a rate 
war inaugurated by the Southern Railway. 
A cut of 35 per cent, had been made with 
notice that, if this was met, a further cut of 
80 per cent, would be made in the rates. It 
was alleged that its ultimate object in this 
was to annihilate competition by the de- 



FREEDOM FOR FAIR COMPETITION 23 

struction of its competitors. How deplor- 
able, in a public service, this seemed to Mr. 
Justice Simonton, may be seen from his 
extreme language: "The destructive results 
of a rate war waged between two great sys- 
tems of railroads are recognized and depre- 
cated by men of the greatest ability who 
have considered the subject. They impair 
and destroy the usefulness of the railroads 
themselves, and their ability to serve the 
public with certainty, efficiency, and safety. 
The business interests of the community 
which move the crops and bring supplies to 
the consumer require that rates be stable. 
Every precaution has been taken by state 
legislatures and by the congress to keep 
them just and reasonable, — just and reason- 
able for the public and for the carriers. A 
few favored points and a few persons may 
for a short time receive temporary advan- 
tage. But the result of such a war is the 
destruction of values, the disturbance and 
injury of all business interests, the demoral- 
ization and confusion of rates, and great 
public and private loss." 



24 THE CONTROL OF THE MARKET 



VII 



The attempt in every modern case of this 
sort is, therefore, to show something more 
than mere competition — to show in the par- 
ticular case there are special circumstances 
which bring the case outside the ordinary 
course of competition. A striking instance 
of this is the recent case of Passaic Print 
Works v. Ely & Walker Dry Goods Com- 
pany (105 Fed. 163). These manufacturers 
of various brands of calicoes, which sold 
usually at fixed prices, complained of a cir- 
cular sent out by these jobbers, wholly ma- 
liciously, so it was alleged, offering these 
prints at cut prices. This injured the manu- 
facturers' trade; for no other jobber could 
sell " Central Park Shirtings " at 3y 2 cents 
per yard, the list price, while these jobbers 
were offering the same goods at 2% cents. 
The majority of the court — Mr. Justice 
Thayer writing the opinion — decided against 
the complainants; the gist of his opinion 
being this: "The owner of property, real 
or personal, has an undoubted right to sell 
it and to offer it for sale at whatever price 
he deems proper, although the effect of such 
offer may be to depreciate the market value 



FREEDOM FOR FAIR COMPETITION 25 

of the commodity which he thus offers, and 
incidentally to occasion loss to third parties 
who have the same kind or species of prop- 
erty for sale." 

It should be noted that the decision in 
this case goes to the extreme of making com- 
petition an absolute justification, regardless 
of circumstances. But in Tuttle v. Buck 
(107 Minn. 145) there is a late authority 
the other way. It was held in that case that 
a complaint stated a legal wrong which stated 
in substance, that the defendant, a banker 
and a man of wealth and influence in the 
community, maliciously established a barber 
shop, employed a barber to carry on the busi- 
ness, and used his personal influence to 
attract customers from the plaintiff's barber 
shop, not for the purpose of serving any 
legitimate purpose of his own, but for the sole 
purpose of maliciously injuring the plaintiff, 
whereby the plaintiff's business was ruined. 
The opinion of Mr. Justice Elliott shows 
real insight into the nature of the problem, 
as even the following extracts abundantly 
show. " It must be remembered that the 
common law is the result of growth and 
that its development has been determined by 
the social needs of the community which it 



26 THE CONTROL OF THE MARKET 

governs. It is the resultant of conflicting 
social forces, and those forces which are for 
the time dominant leave their impress upon 
the law. For generations there has been a 
practical agreement upon the proposition that 
competition in trade and business is desirable ; 
and this idea has found expression in the 
decisions of the courts, as well as in statutes. 
But it has led to grievous and manifold 
wrongs to individuals; and many courts have 
manifested an earnest desire to protect the 
individual from the evils which result from 
unrestrained business competition. The prob- 
lem has been to so adjust matters as to pre- 
serve the principle of competition and yet 
guard against its abuse to the unnecessary 
injury to the individual. To divert to 
one's self the customers of a business 
rival by the offer of goods at lower 
prices is in general a legitimate mode of 
serving one's own interest, and justifiable 
as fair competition. But when a man starts 
an opposition place of business, not for the 
sake of profit to himself, but regardless of 
loss to himself, and for the sole purpose of 
driving his competitor out of business, and 
with the intention of himself retiring upon 
the accomplishment of his malevolent pur- 



FREEDOM FOR FAIR COMPETITION 27 

pose, he is guilty of a wanton wrong and 
an actionable tort." 

VIII 

According to the better opinion at the 
present time, as expressed in the writings 
of the many authorities who have turned their 
attention of late to the problem of the place 
of competition in the law, fair competition is 
considered as a matter of justification upon 
grounds of policy. The accepted theory is 
that every man engaged in business has a 
right prima facie to have his custom undis- 
turbed; in this view a person who diverts 
trade from him commits a legal wrong prima 
facie. But if this trade is invaded in the 
course of fair competition there is a recog- 
nized justification; while there is no valid 
excuse in the case of unfair competition. 
The comparison of two cases may bring this 
out more clearly. 

In Graham v. St. Charles Street Railway 
(47 La. Ann. 214) a foreman posted a 
notice to the effect that he would discharge 
employees who should continue to deal with 
Graham, a grocer. The court held that 
such unjustifiable interference with the 
grocer's business constituted an actionable 



28 THE CONTROL OF THE MARKET 

wrong, Chief Justice Nichols saying: " In 
so doing the defendants would not only con- 
trol their own will, action, and conduct, 
but forcibly control and change, from pure 
motives of malice the choice and will of 
others, through fear of non-employment or 
discharge. This will and power of choice, 
both the plaintiff and the parties themselves 
are entitled to have left free, and not coerced 
in order to simply work the former damage 
and injury." 

On the other hand, in Robinson v. Texas 
Pine Land Association (40 S. W. Rep. 843), 
where the Land Company gave notice that 
it would discharge employees who did not 
trade at its store, but bought supplies of 
Robinson, the court held that there was no 
actionable wrong. As Chief Justice James 
said: "If the defendant could so control its 
employees as to prevent their dealing with 
plaintiff, or so control their wages as to 
divert them from the channels of the plain- 
tiff's business in favor of his own, we know 
no rule making it actionable. Had the 
•defendant no proper interest of his own to 
subserve in so doing, but had acted wantonly 
in causing loss to plaintiff, the rule would 
have been different. The fact that defend- 






FREEDOM FOR FAIR COMPETITION 29 

ant's purpose by the act was to break plain- 
tiff up in business would not give the cause 
of action, for that is the natural result of 
successful competition." 

It is submitted that both of these cases 
are good law, but it would be impossible 
to reconcile them without the theory here 
defended; however, this general theory is 
now so well accepted that it no longer re- 
quires an elaborate defense. The right of 
every man in any business to adequate pro- 
tection of his probable expectancy is now well 
established; but equally well recognized is 
the necessary justification of any damage 
caused a business rival in the regular course 
of fair competition. 

IX 

What is not justifiable under these rules 
is seen in London Guaranty and Accident 
Company v. Horn (206 111. 493) . One Horn, 
while in the employ of Arnold, Schwinn & 
Co., suffered the loss of two fingers on his 
right hand while attempting to operate a 
milling machine. At the time of this injury 
Arnold, Schwinn & Co., carried an indemnity 
policy in the London Guaranty and Accident 



30 THE CONTROL OF THE MARKET 

Company, which provided that the Guaranty 
Company could cancel the policy at any 
time upon giving five days' notice. Horn 
brought suit against Arnold, Schwinn & Co., 
in which a verdict was subsequently rendered 
for $3500, from which judgment an appeal 
was taken, which was pending at the time of 
the trial of this case. Pending that suit, one 
Robinett, representing the Guaranty Com- 
pany, called at the factory of Arnold, 
Schwinn & Co., where Horn had been em- 
ployed, and offered Horn $100 in settlement 
of his claim, telling him that unless he 
accepted that amount he would have him dis- 
charged by Arnold, Schwinn & Co. Robinett 
then said to O'Connell, in the presence of 
Horn, that O'Connell would have to dis- 
charge Horn, as he refused to give the 
company a release. O'Connell at first was 
much disinclined to discharge Horn; but 
finally did so upon the threat being made that 
otherwise the Guaranty Company would 
cancel the policy. The Illinois Court held 
that Horn could recover from the Guaranty 
Company the damages caused him by losing 
his job. Mr. Justice Scott thus concluded 
his opinion: " It follows therefore that the 
act of the defendant complained of was 



FREEDOM FOR FAIR COMPETITION 31 

wrongful, and in the legal sense of the term 
malicious, because without justification." 

To be compared with this is a case upon 
the other side of the line. The facts are 
essentially alike, except for the new factor 
that there is competition between the liti- 
gants. In this case of Walsh v. Dwight (40 
N. Y. App. Div. 513) it appeared that the 
Dwight concern, the proprietors of the Cow 
Brand of saleratus, sold their product to 
jobbers upon special terms, giving a rebate 
to those jobbers who would agree not to sell 
any saleratus or soda in bulk or in boxes at 
less price than the list rates for Dwight's 
Cow Brand. The Walsh concern complained 
that thereby they were unable to market 
their products through these jobbers at all, 
since none would buy their less known goods 
at these prices; and they added that the 
prices asked for the Cow Brand were ficti- 
tious and extortionate, caused by extensive 
and extravagant advertising. But naturally 
Mr. Justice Ingraham could see nothing ille- 
gal in what was being done in this case, since 
the justification of competition was appar- 
ent. " The defendants simply offered to 
parties purchasing their goods to make a 
reduction in the price of the goods sold, in 



32 THE CONTROL OF THE MARKET 

consideration of the purchasers agreeing not 
to sell the goods at a less price than that 
named, and not to sell the goods of other 
manufacturers at a less price than that at 
which they agreed to sell the defendants' 
goods. It is difficult to see upon what ground 
it can be claimed that such a contract is ille- 
gal." 



It is because of the underlying public 
policy that lawful competition justifies in- 
terference with the business of another. The 
theory is that free competition is for the 
best interests of society; for it is believed 
that the law does its best for all when it gives 
to every man an equal chance. Enough has 
been quoted to show how inveterate the be- 
lief has become that free competition is for 
the best interests of society. The State acting 
through the courts is permitting the despe- 
rate struggle for individual advancement to 
go on with the fewest possible rules, because 
the most of us believe that this is for the 
best for all of us. It is not a perfect way 
of ordering our world — far from it. No 
economist can fail to see that the competi- 
tive system has not only its costly mistakes, 






FREEDOM FOR FAIR COMPETITION 33 

but its inevitable wastes. Moreover, there is, 
in some lines of production and distribution, 
a danger that, if the law permits competi- 
tion to go to every length, the survival only 
of the fittest may unduly reduce the number 
of the competitors, so that in the end much 
of the benefit of competition may be lost. 
Most of us still believe that the advance in 
the arts and the march of commerce in mod- 
ern times have been due to the incentive of 
competition. More than this, we believe that 
never in the history of mankind has the ex- 
ceptional man had such opportunity, nor the 
average man such return for his industry, 
as in modern times under the competitive 
system. And, as we have seen, so long as 
this is public opinion, the public policy for 
free competition will remain. 



NOTE 

One is quite justified by the latest authorities in 
basing everything upon this fundamental theory, that 
intentional interference with business rights is prima 
facie a clear tort, and that, unless plain justification 
be sufficiently shown, action lies. See, among many 
others, the following cases: Chipley v. Atkinson, 23 Fla. 
206; Hollenbeck v. Ristine, 114 Iowa, 358; London 
Guaranty Co. v. Horn, 206 111. 493; Tuttle v. Buck, 
107 Minn. 145; Klengel v. Sharp, 104 Md. 218; Kirk- 
wood v. Finnegan, 95 Mich. 543. These principles are 
most elaborately worked out in the long series of able 
opinions in Massachusetts, the most informing of which 
is perhaps Pickett v. Walsh, 192 Mass. 572. And it 
is stated with the utmost accuracy in the New Jersey 
decisions, particularly in Jersey City Co. v. Cassidy, 
63 N. J. Eq. 769. 

This general theory is strongly opposed in recent 
times by the majority opinions in Allen v. Flood, 1898 
A. C. 1, and in National Assn. v. Cummings, 170 N. Y. 
315. But in view of later cases these opinions can 
hardly be said to represent the law even in their re- 
spective jurisdictions. Payne v. Railroad, 3 Lea. 507, 
and Raycroft v. Taynter, 68 Vt. 219^ seem to be based 
upon this opposite theory. But Guethler v. Altman, 
26 Ind. App. 587 and Heywood v. Tillson, 75 Me. 225, 
usually cited to the same effect, are plainly distinguish- 
able, as there was certainly sufficient justification for 
the interference shown in the facts of those cases. 



CHAPTER III 

TYPES OF UNFAIR COMPETITION 



Mere competition, however, is not a suffi- 
cient justification for taking away business 
from a rival; it must be fair competition as 
well. Generally speaking, a customer may 
be taken away from a rival by any fair in- 
ducement, but not by any unfair methods. 
Advertisement and solicitation, for example, 
are fair; fraud and intimidation, equally 
plainly, are unfair. That is held fair which 
the community regards as consistent with its 
safety; that is held unfair which the State 
considers dangerous to its peace. What is 
fair and what is unfair can hardly be more 
exactly defined without hampering us too 
much in dealing with new conditions. The 
predatory tactics of the modern trusts have 
shown us that there are new wrongs which 
our law must be prepared to meet. It is 
not enough to maintain an effective police 
against the old wrongs. There are new sins 

36 



TYPES OF UNFAIR COMPETITION 37 

against industrial society which the law must 
be capable of reaching. In dealing with the 
traditional law, however, one may generalize 
enough to cover the present situation. A 
narrow conception of the older cases would 
not give the law scope enough to meet these 
new conditions. But considered in a broad 
way the older cases will give us authority 
enough to deal with the present situation. 
For thus our common law, as a system of 
justice, proves itself, from age to age, cap- 
able of dealing with the wrongs of which that 
age complains. 

ii 

The most obvious case of unfair competi- 
tion would seem to arise where a customer 
who is under contract with one dealer is in- 
duced by another to break that contract. 
The first case in which this was held to be 
unfair competition was, however, the com- 
paratively recent case of Lumley v. Gye 
(2 E. & B. 216). A Miss Wagner being 
under contract to sing for one Lumley, 
another manager, Gye, induced Miss Wagner 
to break her contract and sing for him. The 
court held that this inducement constituted a 
legal wrong, in analogy to the ancient action 



38 THE CONTROL OF THE MARKET 

for the enticement of a servant. Mr. Justice 
Earle indicated the wider ground upon which 
the case was decided. " He who maliciously 
procures a damage to another by violation of 
his right ought to be made to indemnify, and 
that whether he procures an actionable wrong 
or a breach of contract. He who procures the 
non-delivery of goods according to contract 
may inflict an injury, the same as he who 
procures the abstraction of goods after de- 
livery; and both ought, on the same ground, 
to be made responsible." 

The most recent case in England reaffirms 
this doctrine, upon a state of facts so ex- 
traordinary that it is worth the consideration 
of every student of present conditions. In 
Glamorgan Coal Company v. South Wales 
Miners' Federation (1903 2 K. B. 545), an 
action was brought by various owners of 
collieries against a miners' federation, claim- 
ing damages for wrongfully inducing work- 
men employed in the collieries to break their 
contracts of service. By an elaborate agree- 
ment between masters and men, the wages 
paid were upon a sliding scale — higher when 
the market for coal was up, lower when it 
was down; by another clause neither party 
to the contract could terminate it except by 



TYPES OF UNFAIR COMPETITION 39 

notice given on the first of the month. In 
this state of facts, the executive committee 
of the Miners' Federation, believing that a 
restriction of production would raise the 
price of coal in the market, issued a manifesto 
that the workmen " should observe Fridays 
and Saturdays as general holidays." Counsel 
defended the Federation upon the ground 
that what was done was solely with the 
motive of advancing the interests of the 
men. But the Court of Appeal finally dis- 
posed of this contention, Lord Justice Ster- 
ling saying on that point: " The justification 
set up seems to me to amount to no more than 
this — that the course which they took, al- 
though it might be to the detriment of the 
masters, was for the pecuniary interest of 
the men; and I think it wholly insufficient. 
The defendants took active steps to carry 
this policy into effect, and, as I have said, 
interfered to bring about the violation of 
legal rights." 

in 

Upon the whole this English doctrine may 
be said to prevail in America, although there 
are several jurisdictions which hold that in the 
course of competition one may go so far as to 



40 THE CONTROL OF THE MARKET 

induce the breaking of contracts. In a recent 
Kentucky case, Chambers & Marshall v. Bald- 
win (91 Ky. 121), for example, the substance 
of the cause of action was that the plaintiffs 
had made a contract with one Wise for his 
crop of tobacco at five cents per pound, and 
that thereafter the defendants, with full 
knowledge of this contract, induced Wise to 
sell his crop to them at a higher price. But 
Judge Lewis said: "Competition in every 
branch of business being not only lawful, 
but necessary and proper, no person should, 
or can, upon principle, be made liable in 
damages for buying what may be freely 
offered for sale by a person having the right 
to sell, if done without fraud, merely because 
there may be a preexisting contract between 
the seller and a rival in business, for a breach 
of which each party may have his legal rem- 
edy against the other. Nor, the right to buy 
existing, should it make any difference, in a 
legal aspect, what motive influenced the pur- 
chaser." 

It should be noted, however, that it is uni- 
versally agreed that " to induce a servant to 
leave his master's service at the expiration 
of the time for which the servant had hired 
himself, although the servant had no intention 



TYPES OF UNFAIR COMPETITION 41 

at the time of quitting his master's service," 
is not actionable, to use the example put by 
Lord Kenyon in a leading case, Nichol v. 
Martyn (2 Esp. 732), to illustrate the prin- 
ciple that " everyone has a right, if he can, 
to better his situation in the world; and if he 
does it by means not contrary to law it is 
damnum sine injuria" 

rv 

Of course, if fraud is used in competition, 
it is illegal. Unfair competition of this sort 
has become all too common in modern trade; 
but the courts bid fair to curb it. One of the 
earlier cases which put the law on this point 
beyond all doubt went so far as to decide 
that men might not use their own names in 
trade so as to work fraud upon the public. 
In this case of Croft v. Day (7 Beav. 84) it 
appeared that a blacking manufactory had 
long been carried on under the firm name 
of Day & Martin at 97 High Holborn, Lon- 
don. A person by the name of Day, with 
one Martin, set up the same trade at 90^ 
Holborn Hill. The new concern marked 
their product as Day & Martin's blacking, 
using labels of a style similar to that used 
by the old concern. The Master of the Rolls 



42 THE CONTROL OF THE MARKET 

had no doubt of his right to issue an injunc- 
tion under these circumstances: " It has been 
very correctly said that the principle in these 
cases is this, — that no man has a right to 
sell his own goods as the goods of another. 
You may express the same principle in a dif- 
ferent form, and say that no man has a right 
to dress himself in colors or adopt and bear 
symbols, to which he has no peculiar or ex- 
clusive right, and thereby personate another 
person, for the purpose of inducing the public 
to suppose, either that he is that other per- 
son, or that he is connected with and selling 
the manufacture of such other person, while 
he is really selling his own." 

We have innumerable modern instances 
to show how far the law will go to protect 
one manufacturer from fraudulent competi- 
tion by his rival. One of the best reasoned 
of these is Waltham Watch Co. v. United 
States Watch Co. (173 Mass. 85). The 
plaintiff was the first manufacturer of watches 
in Waltham, and its watches had acquired a 
high reputation in the markets of the world 
as " Waltham watches " before the defendant 
began to do business there. It was found 
at the hearing that the public associated the 
goods of the plaintiff with the name " Wal- 



TYPES OF UNFAIR COMPETITION 43 

tham watch " ; and the injunction granted 
upon this showing restrained the defendants 
from calling its watches " Waltham watches/ 5 
although it manufactured them in Waltham. 
Mr. Justice Holmes, in sustaining the injunc- 
tion, gave the modern theory with character- 
istic exactness: " In cases of this sort, as in 
so many others, what ultimately is to be 
worked out is a point or line between con- 
flicting claims, each of which has meritorious 
grounds and would be extended further were 
it not for the other. It is desirable that the 
plaintiff should not lose custom by reason 
of the public mistaking another manufacturer 
for it. It is desirable that the defendant 
should be free to manufacture watches at 
Waltham, and to tell the world that it does 
so. The two desiderata cannot both be had 
to their full extent, and we have to fix the 
boundaries as best we can. On the one hand, 
the defendant must be allowed to accomplish 
its desideratum in some way, whatever the loss 
to the plaintiff. On the other, we think the 
cases show that the defendant fairly may be 
required to avoid deceiving the public to the 
plaintiff's harm, so far as is practicable in a 
commercial sense." 



44 THE CONTROL OF THE MARKET 



Libelous statements must not be used to 
turn customers from a rival. Indeed the 
law has always been unusually considerate of 
the reputation of tradesmen; and when one 
publishes of a tradesman or merchant any 
matter in relation to his calling which, if true, 
would render him unworthy of patronage, 
one is liable to an action, even without damage 
being shown. This was pointed out in the 
recent case of Davey v. Davey (50 N. Y. 
Supp. 161), and thus applied to the facts. 
" The litigants are brothers. The defendant 
carried on the grocery and tea business at 
No. 2295 First Avenue, and the plaintiff 
thereafter opened a similar business at No. 
2331 First Avenue. The defendant threat- 
ened that, if the plaintiff opened a rival 
establishment near the defendant's store, he 
would break up the business of the plaintiff; 
and after the latter opened the store the de- 
fendant caused to be printed, and distributed 
broadcast, 5000 circulars, in which, after 
eulogistically describing the superiority of his 
wares and the advantage the public would 
derive by patronizing him, he said, of and 
concerning the jjlaintiff and his business 



TYPES OF UNFAIR COMPETITION 45 

methods, that an unscrupulous grocer of the 
same name in the immediate vicinity or 
neighborhood advertises ' Davey's teas and 
coffees ' with a view to deceive the public, and 
may sell an inferior article. The words, 
though cunningly devised and put together, 
taken in their plain and popular sense, that in 
which the readers were sure to understand 
them, bear the construction that the plaintiff 
was an unprincipled grocer, that he was dis- 
honest in his business, for he advertised 
Davey's teas and coffees with a view to de- 
ceive the public; and that he sold inferior 
articles, this being one of the characteristics 
of unscrupulous traders. While the defend- 
ant had the undoubted right to praise his own 
wares, he had no right to single out the plain- 
tiff and not only denounce his wares, but, in 
connection therewith, impugn his business in- 
tegrity." 

Furthermore, a false statement in relation 
to the goods sold by a merchant may so in- 
jure him in his business as to give him a 
right of action for damages. There are cases 
enough in the books of this trade libel, as it 
is usually called. In the leading English 
case of Western Counties Manure Company 
V. Lawes Manure Company (L. R. 9 Exch. 



46 THE CONTROL OF THE MARKET 

218) the facts were these: The defendants 
published fabricated analyses of four artificial 
fertilizers, showing its own to be the stron- 
gest and the cheapest, and that of the plaintiffs 
to be the weakest and the dearest. By reason 
of these advertisements various persons, who, 
if they had not been told that which was 
untrue, would have continued to deal with 
the plaintiffs, were alleged to have ceased to 
deal with them. Commenting on these facts 
in his decision, Lord Bramwell said: " It 
seems to me, however, that where a plaintiff 
says, ' You have without lawful cause made 
a false statement about my goods to their 
comparative disparagement, which false state- 
ment has caused me to lose customers,' an 
action is maintainable." 



VI 

What constitutes unfair competition opens 
up too large a subject for any considerable 
discussion here. It is enough to point out that 
the border line must be overstepped unques- 
tionably before the competition will be held 
unfair. One or two cases will illustrate the 
extent to which competition will be allowed to 
go before the court will interfere. Perhaps 
the most interesting is White v. Mellin (1895 



TYPES OF UNFAIR COMPETITION 47 

A. C. 154). The respondent was the pro- 
prietor of Mellin's Food; the appellant was 
the proprietor of Vance's Food. The original 
action was brought for the circulation of the 
following advertisement: "Notice — The pub- 
lic are recommended to try Dr. Vance's pre- 
pared food for infants and invalids, it being 
far more nutritious and healthful than any 
other preparation yet offered." The keen 
business insight of Lord Herschell was well 
displayed in his opinion in this case, when 
he brushed aside all the distinctions of counsel 
with: " Just consider what a door would be 
opened if this were permitted. That this sort 
of puffing advertisement is in use is notori- 
ous; and we see rival cures advertised for 
particular ailments. The court would then 
be bound to inquire, in an action brought, 
whether this ointment or this pill better cured 
the disease which it was alleged to cure — 
whether a particular article of food was in 
this respect or that better than another. In- 
deed, the courts of law would be turned into 
a machinery for advertising rival produc- 
tions by obtaining a judicial determination 
which of the two was the better." 

In a later case the English courts again 



48 THE CONTROL OF THE MARKET 

took the position that they would permit 
competition to go on without interference, 
unless something was done so outrageous 
as to be clearly wrong. In Hubbuck v. 
Wilkinson (1899, 1 Q. B. 86), it appeared 
that the plaintiffs and defendants were com- 
petitors in the paint business, and that de- 
fendants had advertised that, as the result 
of certain paint covering experiments con- 
ducted by them, their paint proved superior 
in every respect. The plaintiffs in their 
complaint alleged that the reports were un- 
true, but the divisional court summarily dis- 
missed the complaint, which the Court of 
Appeal held it was right in doing, guarding 
itself, however, in this wise: " It is not neces- 
sary to consider how the case would have 
stood, if the defendants had not been rival 
traders simply puffing their own goods and 
comparing theirs with those of the plaintiffs. 
If the defendants had made untrue state- 
ments concerning the plaintiffs' goods be- 
yond saying that they were inferior to, or, 
at all events, not better than, those of the 
defendants, or if the defendants were not 
rivals in trade and had no lawful excuse for 
what they said, it would not have been right 
summarily to strike out the statement of 



TYPES OF UNFAIR COMPETITION 49 

claim as showing no reasonable cause of 
action." 

VII 

V 

Intimidation may not be used in competi- 
tion to frighten a customer from a rival. Our 
law often speaks in parables; and Keeble v. 
Hickeringill (11 East 574 note) is undoubt- 
edly one of the most significant cases in our 
books. The plaintiff there declared that he 
was lawfully possessed of a close of land 
called Minott Meadow, a decoy pond, to 
which divers wild fowl used to resort and 
come: and the plaintiff had, at his own costs 
and charges, prepared and procured divers 
decoy ducks, nets, machines, and other en- 
gines for the decoying and taking of the wild 
fowl, and enjoyed the benefit in taking them: 
the defendant knowing which, and intending 
to damnify the plaintiff in his vivary, and to 
fright and drive away the wild fowl used to 
resort thither, and deprive him of his profit, 
did resort to the head of the said pond and 
vivary, and did discharge six guns laden with 
gunpowder, and with the noise and stink 
of the gunpow r der, did drive away the wild 
fowl then being in the pond, whereby the 
wild fowl were frighted away, and did for- 



50 THE CONTROL OF THE MARKET 

sake the said pond. Lord Holt, then Chief 
Justice, made of this suit one of the leading 
cases in our law. A few extracts from his 
opinion will show the fundamental principles 
upon which it is based: "I am of opinion 
that this action doth lie. It seems to be new 
in its instance, but is not new in the reason 
or principle of it. For, first, this using or 
making a decoy is lawful. Secondly, this 
employment of his ground to that use is 
profitable to the plaintiff, as is the skill and 
management of that employment. As to the 
first, every man that hath a property may 
employ it for his pleasure and profit, as for 
alluring and procuring decoy ducks to come 
to his pond. Then when a man useth his art 
or his skill to take them, to sell and dispose 
of, for his profit; this is his trade; and he 
that hinders another in his trade or live- 
lihood is liable to an action for so hinder- 
ing him. Where a violent or malicious act 
is done to a man's occupation, profession, 
or way of getting a livelihood; there an 
action lies in all cases. But if a man doth 
him damage by using the same employment; 
as if Mr. Hickeringill had set up another 
decoy on his own ground near the plaintiff's, 
and that had spoiled the custom of the plain- 



TYPES OF UNFAIR COMPETITION 51 

tiff, no action would lie, because he had as 
much liberty to make and use a decoy as the 
plaintiff." 

Unfortunately, because of labor disputes, 
our modern books are filled with cases in- 
volving force in competition; but fortunately 
our courts bid fair to check violence in labor 
competition, as they are curbing fraud in 
trade competition. A recent case showing the 
lengths to which labor unions may go is 
Reinecke Coal Mining Co. v. Wood (112 
Fed. 477). The United Mine Workers de- 
termined to make what was significantly 
called a " striking district " out of certain 
territory where coal mining was carried on, 
with the policy of forcing the operators there 
to yield to their demands by the terror in- 
spired by the tactics adopted. A large force 
was encamped in the immediate neighbor- 
hood of the mines in that territory, and, it 
was plain enough that by the terror to be 
thus inspired, they designed to compel non- 
union labor employed there to join the United 
Mine Workers, and thereafter to strike if a 
certain scale of prices was not adopted by 
their employers. It should be noted that 
there was no strike then pending at any of the 
mines in the district; indeed, there appears to 



52 THE CONTROL OF THE MARKET 

have been little or no discontent among the 
laborers employed there. Evans, the district 
judge, treated the matter with the seriousness 
that the occasion demanded. The course of 
his reasoning was this: "It cannot be that 
this course was not meant to be an attempt 
to compel the complainant, by force and in- 
timidation, to yield to the defendants' wishes 
and demands. The encampment of armed 
men in the vicinity of the mines was not meant 
for gentle persuasion or peaceable argument. 
Peaceable and argumentative persuasion is 
entirely admissible, but is not accomplished 
nor intended to be accomplished in that man- 
ner. The conduct of the defendants, on the 
contrary, had all the elements of terror and 
intimidation; and those elements, being in 1 
tentionally present, were indubitably de- 
signed to compel the complainant to accede 
to demands it had the lawful right to decline 
or reject at its option. A court cannot shut 
its eyes to propositions so palpable." 

VIII 



It should be noted that two theories pre- 
vail as to the fundamental basis of the action 
for unfair competition. According to the 



TYPES OF UNFAIR COMPETITION 53 

older view, when the act complained of is 
some recognized form of wrong against some- 
one, it was formerly vaguely felt that this 
explained the right of action the injured 
competitor admittedly had. This idea showed 
itself most clearly in the great case of Allen 
V. Flood (1898 A. C. 1), in the House of 
Lords a few years ago. Briefly the facts in 
that case were that one Allen, who was rep- 
resentative of certain workmen, had intention- 
ally procured the discharge of other workmen, 
who were working in violation of the policies 
of the union he represented, among whom 
was one Flood. Although a great majority 
of the justices who gave opinions upon this 
case from first to last were in favor of Flood, 
a majority of the House of Lords found for 
Allen. How the matter stood in the minds of 
this majority is best expressed by Lord Mac- 
naughton in the following paragraph: " I do 
not think that there is any foundation in good 
sense or in authority for the proposition that 
a person who suffers loss by reason of another 
doing or not doing some act which that other 
is entitled to do or to abstain from doing at 
his own will and pleasure, whatever his real 
motive may be, has a remedy against a third 
person who, by persuasion or some other 



54 THE CONTROL OF THE MARKET 

means not in itself unlawful, has brought 
about the act or omission from which the loss 
comes, even though it could be proved that 
such person was actuated by malice towards 
the plaintiff, and that his conduct, if it could 
be inquired into, was without justification or 
excuse." 

The newer view of this situation is perhaps 
best set forth in the recent case of Jersey 
City Printing Co. v. Cassidy (63 N. J. Eq. 
759), where, in issuing an injunction to pro- 
tect an employer from undue interference by 
his striking employees, Vice Chancellor 
Stevenson said in part: " In the case before 
this court the Jersey City Printing Company 
claims the right, not only to be free in employ- 
ing labor, but also the right that labor shall 
be free to be employed by it, the Jersey City 
Printing Company. A large part of what 
is most valuable in modern life seems to de- 
pend more or less directly upon ' probable 
expectancies.' When they fail, civilization, 
as at present organized, may go down. As 
social and industrial life develops and grows 
more complex these ' probable expectancies ' 
are bound to increase. It would seem to be 
inevitable that courts of law, as our system of 
jurisprudence is evolved to meet the growing 



TYPES OF UNFAIR COMPETITION 55 

wants of an increasingly complex social order, 
will discover, define, and protect from undue 
interference more of these ' probable expect- 



ancies.' ' 



IX 

We have, therefore, these differing views 
of the nature of the action for unfair competi- 
tion, opposed in a fundamental way. By 
what may be called the earlier theory, it is 
said that any man can do in trade whatever 
he pleases to get business away from another, 
provided he does nothing illegal in itself. 
But, by what is obviously the current phi- 
losophy of the matter, the beginning is made 
at the other end, by saying that every man 
engaged in business has a right to pursue his 
calling freely, and that consequently any in- 
terference with this business of his by another 
must be justified. What may, therefore, be 
carried forward into the subsequent discus- 
sion of various unfair practices in our com- 
plicated modern commerce, is the idea that 
to compete as one wills is not an absolute 
right in our law. On the contrary, competi- 
tion is only a thing permitted by the State 
when its operation is for the best interests of 
established society, forbidden if it is carried 



56 THE CONTROL OF THE MARKET 

on under circumstances prejudicial to the so- 
cial order. It cannot be said, therefore, at 
the outset in a discussion of competition by 
combinations, such as this is largely to be, 
that, when one man has an absolute right to 
compete as he chooses, thereupon ten men 
acting together have the same right to com- 
pete as they choose. The theory which has 
been developed here cuts in back of all this, 
by denying to single men the privilege to 
compete when that is opposed to sound policy. 
By this theory, whenever the operation of a 
combination is proved to be detrimental to 
the best interests of society, its course will be 
held illegal. 



NOTE 

It would be impossible to cite on this fly leaf even 
representative cases from the now almost innumerable 
cases which have arisen as to unfair competition. For 
the purpose of directing further the reading of any 
person who may be interested, the following cases where 
the competition was held fair (although close to the 
line) are selected from the long list of cases of this 
sort which might be cited. For example, in Evans v. 
Harlow, 5 Q. B. 624 (1844), and Young v. Macrae, 3 
B. & S. 264 (1850), the court held that they would not 
give judgment against a merchant who was using rather 
extreme comparative statements in puffing his goods. 

In Parson v. Gillespie (1898), A. C. 239, and Van 
Camp v. Cruikshank, 90 Fed. 814 (1898), the court re- 
fused to enjoin a manufacturer from putting out his 
goods in similar ways to those used by other manufac- 
turers, on the ground that these were ways common to 
the trade. And in Allejo v. Worsley (1898), 1 Ch. 274 
and West Virginia Transportation Co. v. Standard Oil 
Co., 50 W. Va. 611 (1902), the court refused to con- 
sider the damage done by extreme competition as a basis 
for recovery. The right to build up a business to any 
size at the expense of one's rivals is sustained in Citi- 
zens' Light, H. & P. Co. v. Montgomery Light & W. 
P. Co., 171 Fed. 553 (1909); but as is pointed out in 
Lubricating Oil Co. v. Standard Oil Co., 42 Hun. 153 
(1886), only fair means can be used in such aggrandize- 
ment. 



57 



CHAPTER IV 

COERCION BY LABOR UNIONS 



It is sometimes said that, although the 
working classes were once so unfairly treated 
by the law that they could do nothing for their 
own advancement, now the workingmen al- 
most constitute a privileged class, free to do 
pretty much as they may choose. To one 
who follows the diverse currents of opinion 
that appear upon the surface of present-day 
discussion, it might seem, for example, that 
the doctrine of the open shop was in the 
greatest danger, if indeed the doctrine of 
the closed shop was not already established. 
One who fears thus forgets the law, with 
which is the final decision. Until the mass 
of men have deliberately changed their 
theories of society and adopted new ones in 
their stead, the law does not change funda- 
mentally. From ancient times our law has 
been the protection of the freedom of the 
individual against the oppression of the com- 

58 



COERCION BY LABOR UNIONS 59 

bination. So it remains to-day in the midst 
of alarms the steadfast exponent of the de- 
sire of the great majority of men for the 
maintenance of industrial liberty. 



II 

Our law against combinations goes back 
beyond legal memory. A learned editor of 
one of the Selden Society's publications (1 
Pleas of the Crown 125) has found a case for 
us as early as the year 1225 of an action for 
interference with an established business by 
conspiracy. " The Abbot of Lilleshall com- 
plains that the bailiffs of Shrewsberry do him 
many injuries against his liberty, and that they 
have caused proclamation to be made in the 
town that none be so bold as to sell any mer- 
chandise to the Abbot or his men upon pain 
of forfeiting ten shillings, so that Richard, 
the bedell of the said town, made this procla- 
mation by their orders. And the bailiffs 
defend [i.e. deny] all of it, and Richard like- 
wise defends all of it, and that he never 
heard such proclamation made by any one. 
It is considered that he do defend himself 
twelve handed, and do come on Saturday 
with his law." 



60 THE CONTROL OF THE MARKET 

All through our books from the beginning 
there are cases both civil and criminal upon 
combination and conspiracy, as things apart 
from individual right and wrong. Probably 
the leading case is Rex v. Journeymen Tai- 
lors of Cambridge (8 Mod. 10). One Wise 
and several other journeymen tailors were 
indicted for a conspiracy amongst themselves 
to raise their wages and were found guilty. 
On motion in arrest of judgment the court 
said: "The indictment, it is true, sets forth 
that the defendants refused to work under 
the wages which they demanded; but al- 
though these might be more than is directed 
by the statute, yet it is not for the refusing 
to work, but for conspiring that they are 
indicted, and a conspiracy of any kind is 
illegal, although the matter about which 
they conspired might have been lawful for 
them, or any of them to do, if they had not 
conspired to do it." 

in 

Well down into the nineteenth century, if 
workmen acted in concert in any way against 
their masters they were in danger of being 
held conspirators both in England and 
America. But this law that mere combina- 



COERCION BY LABOR UNIONS 61 

tion was a conspiracy, without regard to acts 
or objects, gradually became obsolete. Com- 
bination is now permitted for the furtherance 
of certain ends by certain means; but it is 
not true to say that it is permitted for any 
purpose by any method. It is necessary 
to-day, therefore, to make distinctions before 
it can be determined what plans may be pur- 
sued by a combination to advance its interests. 
The fundamental distinction in the modern 
law is well shown by a parley between Judge 
and counsel in the case of Re Doolittle and 
another, strikers (23 Fed. 544), thus re- 
ported: — "Mr. Charles C. Allen. Do I 
understand your Honor to say that the act 
of striking, merely carrying out of the 
strike — was unlawful? The Court (Judge 
Brewer) : It is not the mere stopping them- 
selves together, but it is preventing the own- 
ers of the road from managing their engines 
and running their own cars — that is where 
the wrong comes in. Anybody has a right 
to quit work, but in interfering with other 
persons working, and preventing the owners 
of railroad trains from managing those trains 
as they see fit — there is where the wrong 
comes in." 

This distinction is carried to its logical 



62 THE CONTROL OF THE^ MARKET 

extent in the case of the sympathetic strike — 
as may be seen in Old Dominion Steamship 
Company v. McKenna (30 Fed. 48). This 
action was brought to recover $20,000 dam- 
ages, alleged to have been sustained by the 
plaintiff through the unlawful action of the 
defendants in a strike of longshoremen, and 
in their attempt to boycott the plaintiff in 
its business. The defendants styled them- 
selves the Executive Board of the Ocean 
Association of the Longshoremen's Union. 
Not being in plaintiff's employ, and without 
any legal justification so far as appeared, 
they procured plaintiff's workmen in New 
York and in southern ports to quit work in 
a body, until it should accede to the de- 
fendants' demands and pay southern negroes 
the same wages as New York Longshore- 
men. Mr. Justice Brown held that such un- 
warrantable interference by these combined 
defendants constituted an invasion of the 
business right of the steamship company. 
His reasoning is thoroughgoing, as the fol- 
lowing extract will show: " Associations have 
no more right to inflict injury upon others 
than individuals have. All combinations and 
associations designed to coerce workmen to 
become members, or to interfere with, ob- 



COERCION BY LABOR UNIONS 63 

struct, vex, or annoy them in working, or in 
obtaining work, because they are not mem- 
bers, or in order to induce them to become 
members, or designed to prevent employers 
from making a just discrimination in the 
rate of wages paid to the skillful and to the 
unskillful, to the diligent and to the lazy, 
to the efficient and to the inefficient, and 
all associations designed to interfere with 
the perfect freedom of employers in the 
proper management and control of their law- 
ful business, or to dictate in any particular 
the terms upon which their business shall be 
conducted, by means of threats of injury or 
loss, by interference with their property or 
traffic, or with lawful employment of other 
persons, or designed to abridge any of these 
rights, — are pro tanto illegal combinations 
or associations; and all acts done in further- 
ance of such intentions by such means, and 
accompanied by damage, are actionable." 

By the present law, then, mere striking 
is not in itself wrong; and, therefore, merely 
threatening to strike is permissible in itself. 
But on the other hand, the trades union is 
always put to its justification whenever a 
strike is called or planned. Individuals who 
interfere with the existing relations of others 



64 THE CONTROL OF THE MARKET 

must show some affirmative reason in public 
policy why they should be excused; and by 
the same theory whenever the operations of 
a combination are proved to be subversive of 
the true interests of society, its actions will 
be stopped. Moreover, the interests of the 
strikers must be directly involved in order 
to justify their intermeddling. In a sym- 
pathetic strike, as has been seen, anything 
that they may do will be held illegal. But 
if the strike is for their own immediate bet- 
terment, for shorter hours or for higher 
wages, then their striking, being justifiable 
in itself, the question arises as to what 
methods they may be permitted to employ to 
keep their places open. It is obvious that 
distinctions must be taken here as to the 
methods which it is wise to permit in com- 
petition by combination: and indeed there 
may well be a departure from the rules which 
have been laid down as to the methods which 
individuals may employ in competition. 



IV 

The clearest illustration of this difference 
is the boycott About the year 1880. one 
Captain Boycott was a farmer of Lough 



COERCION BY LABOR UNIONS 65 

Mark in the district of Connemara. This 
Boycott was also agent of the principal land- 
lord, Lord Erne; and in his capacity as 
agent in that year had served notice upon 
several of the tenants. The result is a matter 
of history. The population of the region 
for miles around resolved to have nothing to 
do with him, and, as far as they could prevent 
it, not to allow anyone else to have anything 
to do with him. His laborers fled from him; 
and none would come in their places. No 
one would supply him with food; he was cut 
off from every near base of supplies. No 
one would speak with him; he was excom- 
municated from all intercourse with his fel- 
lows. Then the government sent a force of 
soldiers to Lough Mark, and under their 
protection the Boycotts returned to their 
position as citizens in a civilized community. 
Thus the episode closed, but the language had 
gotten now a new word — boycott — to com- 
memorate that event. A new danger had 
been made known which spread terror 
throughout society. A new condition, there- 
fore, confronted the law, requiring its protec- 
tion. 

The leading case upon boycott in America 
is Crump v. Commonwealth (84 Va. 927). 



66 THE CONTROL OF THE MARKET 

In this case the strikers dragged the whole 
community into their dispute. They pub- 
lished a blacklist upon which they put the 
names of every hotel, boarding house, trades- 
man, or shopkeeper who dealt with their 
former employers in any way, or who had 
anything to do with the new employees. 
Finally matters came to such a pass that 
the ringleaders were arrested; and, being 
found guilty by the jury, they appealed 
upon the points of law to the higher court. 
In dismissing the appeal Mr. Justice Faunt- 
leroy spoke very sharply: " It was proved 
that the conspirators declared it their set 
purpose and persistent effort to ' crush ' 
Baughman Brothers; that the minions of the 
boycott committee dogged the firm in all 
their transactions; followed their delivery 
wagons, secured the names of their patrons; 
and used every means short of actual physical 
force to compel them to cease dealing with 
Baughman Brothers — thereby causing them 
to lose from one hundred and fifty to two 
hundred customers and ten thousand dollars 
of net profit. The acts alleged and proved 
in this case are unlawful and incompatible 
with the prosperity, peace, and civilization 
of the country; and, if they can be perpe- 



COERCION BY LABOR UNIONS 67 

trated with impunity, by combinations of ir- 
responsible cabals or cliques, there will be 
the end of government, and of society itself. 
Freedom — individual and associated — is the 
boon and boasted policy and peculium of 
our country; but it is liberty regulated by 
law; and the motto of the law is: Sic utere 
tuOj ut alienum non laedas" 



In the ruling case in the British Empire 
to-day, Quinn v. Leathern (1902 A. C. 495), 
we have one of the clearest examples of the 
sort of pressure which it must be obvious 
that a trades union should be forbidden to 
use, even to advance its own interests. The 
complainant in that case was a butcher en- 
gaged in business near Belfast. His em- 
ployees organized a union to which they 
refused to admit one Dickie, a foreman; they 
later demanded of the plaintiff that he dis- 
miss Dickie. Upon the plaintiff's refusal to 
do this the defendants representing the union 
went to one Munce, who bought meat of the 
plaintiff, and warned him that unless he 
stopped buying while the trouble was on, his 
own men would be called out next. Munce 



68 THE CONTROL OF THE MARKET 

at last yielded to this coercion, and notified 
plaintiff to send no more meat until he set- 
tled with his men. This interference with 
his business relations was the cause of the 
action, in which damages to the trade were 
claimed. The House of Lords, notwith- 
standing the contrary tendencies of Allen v. 
Flood, held for the plaintiff. The best 
opinion was that of Lord Lindley, who 
handled the question with characteristic 
method: "As to the rights of the plaintiff — 
he had the ordinary rights of a British sub- 
ject. He was at liberty to earn his own 
living in his own way, provided he did not 
violate some special law prohibiting him from 
so doing, and provided he did not infringe 
the rights of other people. This liberty in- 
volved liberty to deal with other persons who 
were willing to deal with him. This liberty 
is a right recognized by law; its correlative 
is the general duty of everyone not to pre- 
vent the free exercise of this liberty, except 
so far as his own liberty of action may 
justify him in so doing. But a person's lib- 
erty or right to deal with others is nugatory, 
unless they are at liberty to deal with him if 
they choose to do so. Any interference with 
their liberty to deal with him affects him." 



COERCION BY LABOR UNIONS 69 

In current discussion an attempt is some- 
times made to distinguish between this ex- 
treme case of secondary boycott, which has 
just been illustrated, and the lesser dis- 
turbance created by the primary boycott, as 
it is called, where only the members of the 
affiliated unions are worked upon to break 
off their business relations with dealers who 
persist in continuing to deal with the con- 
cern against which their attack is directed. 
But almost all courts find this sort of boy- 
cott practically as dangerous to the industrial 
peace as the other. In Barr v. Essex Trades 
Council (53 N. J. Eq. 301) the Council of 
the affiliated trades had exhorted its mem- 
bers in this wise: " Friends, one and all, leave 
this council-boycotting ' Newark Times.' 
Cease buying it. Cease handling it. Cease 
advertising in it. Keep the money of fair 
men moving only among fair men. Boycott 
the boycotter of organized fair labor." The 
New Jersey chancery court thought that it 
would be dangerous to industrial society to 
permit such appeals to go unchallenged. 
Vice Chancellor Green discussed the problem 
broadly thus: "The freedom of business ac- 
tion lies at the foundation of all commercial 
and industrial enterprises — men are willing 



70 THE CONTROL OF THE MARKET 

to embark capital, time, and experience there- 
in, because they can confidently assume that 
they will be able to control their affairs 
according to their own ideas, when the same 
are not in conflict with law. If this privilege 
is denied them, if the courts cannot protect 
them, if the management of business is to 
be taken from the owner and assumed by, 
it may be, irresponsible strangers, then we 
will have come to the time when capital will 
seek other than industrial channels for in- 
vestments, when enterprise and development 
will be cripples, when interstate railroads, 
canals, and means of transportation will be- 
come dependent on the paternalism of the 
national government, and the factory and the 
workshop subject to the uncertain chances 
cooperative systems." 



VI 

As our law stands, therefore, in some in- 
stances concerted action is permitted, while 
against many kinds of joint action redress 
may be had. It has been seen that simple 
striking is permitted in certain cases; a com- 
bination of laborers may, for example, de- 
mand higher wages, and then leave in a body 



COERCION BY LABOR UNIONS 71 

if the increase is not granted. On the other 
hand, it has been seen that workmen may 
not bring their combined force to bear upon 
persons who have no part in the dispute to 
induce them not to deal with their former 
employers. The problem of the legality of 
the use of its great power by the trade union 
to force non-union men out of the same em- 
ployment lies somewhere between these two 
extremes. As this is one of the most im- 
portant of modern questions, it might be 
well to state the leading cases with consider- 
able detail, so that there may be clear appre- 
ciation of the precise issue involved. 

In Lucke v. Assembly (77 Md. 396), we 
have a rather aggravated case of unionizing 
a shop. The plaintiff was a non-union man; 
he was non-union against his will, as it were, 
because the Assembly had repeatedly re- 
fused to take him in, although he had several 
times applied for membership. Later the 
Assembly demanded of their employers, that 
they discharge this non-union man, Lucke. 
Rosenfeld Brothers could not withstand the 
pressure; and they discharged Lucke at this 
dictation. Lucke then sued the Assembly 
for damages for the loss of his job; and he 
was successful in his suit. Upon the final 



72 THE CONTROL OF THE MARKET 

appeal Mr. Justice Roberts gave these as 
the reasons: " In this case, we think the 
interference of the appellee was in law 
malicious and unquestionably wrongful. The 
appellant was a man of family, a good work- 
man, engaged in a lawful pursuit, perform- 
ing his duties in an entirely satisfactory man- 
ner, without objection in any respect, and 
willing and desirous of becoming a member 
of the appellee if an opportunity had been 
afforded him. He was not able to obtain 
membership with the appellee, nor was he 
permitted to continue his work with his em- 
ployers, who would gladly have retained him 
in their service, if they could have done so 
without loss or embarrassment to themselves. 
If, therefore, the appellee sought to bring 
about the discharge of the appellant under 
the circumstances detailed in the evidence, 
if not malicious it was certainly wrongful, 
and by so doing it has invaded the legal 
rights of the appellant for which an action 
properly lies." 

A recent case in point is even more thor- 
oughgoing in its denunciation of these at- 
tempts by the unions to force non-union men 
out of the same employment. In Erdman v. 
Mitchell (207 Pa. St. 79), there appeared 



COERCION BY LABOR UNIONS 73 

in evidence a series of labor difficulties in the 
construction of a building too involved to 
relate fully here. Finally the Central Union 
showed its hand, and threatened a general 
strike unless certain men engaged on the 
work, who were not members of an affiliated 
union, should be immediately laid off. An 
application was made in time for an injunc- 
tion, which the lower court granted and the 
upper court confirmed. Mr. Justice Dean 
said, in granting the injunction: " Trades 
unions may cease to work for reasons satis- 
factory to their members, but if they combine 
to prevent others from obtaining work by 
threats of a strike, or combine to prevent an 
employer from employing others by threats of 
a strike, they combine to accomplish an un- 
lawful purpose — a purpose as unlawful now 
as it ever was, though not punishable by in- 
dictment. Such combination is a despotic and 
tyrannical violation of the indefeasible right 
of labor to acquire property, which courts are 
bound to restrain. It is argued that de- 
fendants, either individually or by organiza- 
tion, have the right now to peaceably per- 
suade plaintiffs and others not to work, and 
their employer not to hire them. So they 
have. It is further argued that they can 



74 THE CONTROL OF THE MARKET 

quit work when they choose. So they can. 
But neither of these suggested cases is the 
one before us. Here a strike on a large 
building was declared because plaintiffs 
would not join the particular society. The 
declared purpose of the strike was to cause 
loss of employment to plaintiffs because they 
would not join the Allied Building Trades, 
and chose to remain faithful to their own 
union, The Plumbers' League." 

The cases brought up for discussion in this 
section are undoubtedly less extreme than 
the cases under consideration in the preceding 
section. It may be admitted that in the 
case of unionizing, the ultimate motive of 
the union is to advance its own interests; but 
so it is in boycotting. In boycotting the 
end was held not to justify the means; and 
this may well enough be true of unionizing. 
The principal question is, then, whether this 
sort of concerted action is to be held justi- 
fiable or not. In this respect a difference 
may be urged between boycotting and union- 
izing; it may be said that in boycotting the 
methods employed are indirect, and much 
unnecessary damage is therefore done to third 
parties; while in unionizing it may be claimed 
that the methods are direct, and that there 



COERCION BY LABOR UNIONS 75 

is no unnecessary damage. But the fact 
remains that both in the case of boycotting 
and in the case of unionizing we see the 
resistless force of numbers employed against 
the individuals attacked. The fear of this 
lies at the bottom of all of our laws against 
conspiracy from time immemorial. 



VII 

At least it may be made a working hy- 
pothesis that in unionizing we have the legal 
wrong of conspiracy against those forced out 
of the employment. A case so extreme that 
almost all courts would agree upon it, is 
Curran v. Galen (152 N. Y. 33). It ap- 
peared that in Rochester there was an agree- 
ment between the Ale Brewers' Association 
and the Brewery Workingmen's Assembly 
that no person not a member of the associa- 
tion should be retained in the employment of 
any member of the association. The plain- 
tiff got employment in one of the breweries, 
but declined to join the union. The whole 
opinion of the Court of Appeals follows: 
' The organization of the local assembly in 
question by the workingmen in the breweries 
of the city of Rochester may have been per- 



76 THE CONTROL OF THE MARKET 

fectly lawful in its general purposes and 
methods and may, otherwise, wield its power 
and influence usefully and justly, for all 
that appears. It is not for us to say, nor do 
we intend to intimate, to the contrary; but 
so far as a purpose appears from the defense 
set up to the complaint that no employee of 
a brewing company shall be allowed to work 
for a longer period than four weeks, without 
becoming a member of the Workingmen's 
Local Assembly, and that a contract between 
the local assembly and the Ale Brewers' 
Association shall be availed of to compel 
the discharge of the independent employee, 
is, in effect, a threat to keep persons from 
working at the particular trade and to pro- 
cure their dismissal from employment. While 
it may be true, as argued, that the contract 
was entered into, on the part of the Ale 
Brewers' Association, with the object of 
avoiding disputes and conflicts with the 
workingmen's organization, that feature and 
such an intention cannot aid the defense, nor 
legalize a plan of compelling workingmen 
not to join it, at the peril of being deprived 
of their employment and of the means of 
making a livelihood." 

Plant v. Woods (176 Mass. 492) shows 



COERCION BY LABOR UNIONS 77 

one of the latest developments in this general 
problem. This was a case of a contest for 
supremacy between two labor unions of the 
same craft, having substantially the same 
constitution and by-laws. The chief differ- 
ence between them was that the plaintiff 
union was affiliated with one national organi- 
zation, while the defendant union was affiliated 
with another. It appeared that the members 
of the defendant union declared " all painters 
not affiliated with the Baltimore headquarters 
to be non-union men," and voted to " notify 
the bosses " of that declaration. This action 
was for an injunction to prevent threats 
being made in pursuance of this vote. Mr. 
Justice Hammond stated the following rea- 
sons of the court for confirming the injunc- 
tion against the defendants: "It is to be ob- 
served that this is not a case between the 
employer and the employed, or, to use a 
hackneyed expression, between capital and 
labor, but between laborers all of the same 
craft, and each having the same right as 
any one of the others to pursue his calling. 
In this, as in every other case of equal rights, 
the right of each individual is to be exercised 
with due regard to the similar right of all 
others, and the right of one must be said to 



78 THE CONTROL OF THE MARKET 

end where that of another begins. The right 
involved is the right to dispose of one's labor 
with full freedom. This is a legal right, and 
it is entitled to legal protection." 

The majority of courts thus believe thut 
an organized union should not be allowed to 
work its will, that it would mean disruption 
of the industrial order if a union could be 
permitted to dictate who should work and 
who should not. As a matter of law, the 
question whether the members of a union are 
liable when they demand that their shop be 
unionized depends upon whether the courts 
will find some basis for justification. But 
although the public policy is doubtful, most 
courts seem to be convinced that to allow 
unionizing would be prejudicial to the best 
interests of society. The public wants the 
best services that can be gotten at the lowest 
wages that will be accepted. If we are to 
believe much testimony that is brought for- 
ward in current discussion, unionizing means 
less efficient services and increasing wages. 
This, then, is an instance for the assertion 
of the general policy of the law against com- 
bination in restraint of trade. Our general 
law is, of course, opposed to schemes to con- 
trol the market in any such way. 



COERCION BY LABOR UNIONS 79 

VIII 

There is some dissent to these prevalent 
doctrines; and in order that the discussion 
ma3^ be quite fair it is necessary to give this 
minority a chance to be heard. The principal 
case on the other side is undoubtedly National 
Protective Association v. Cummings (170 N. 
Y. 315). The facts in this case as they were 
brought out at the trial were somewhat com- 
plicated, as the final developments in the in- 
dustrial organization have become so complex. 
The complainants were a formal association 
themselves, who sued both collectively and 
individually; the defendants were also an 
association and the individual members of 
it. The defendant association w r anted to 
put its men at work upon certain works in 
the place of certain men belonging to the 
rival association. They were in a position 
to enforce their demands, as they had strong 
affiliations with the building trades in New 
York. The trial court found that the walk- 
ing delegate of the older association threat- 
ened to cause a general strike against the 
members of the newer association, wherever 
he found them at work upon the same jobs 
with his men. The opinion in this case de- 



80 THE CONTROL OF THE MARKET 

serves respectful consideration, as it is by 
former Chief Justice Parker; but the basis 
of his opinion is the obsolete argument that 
any single man may quit work alone. ' The 
principles quoted above recognize the legal 
right of members of an organization to strike, 
that is, to cease working in a body by pre- 
arrangement until a grievance is redressed, 
and they enumerate some things that may be 
treated as the subject of a grievance, namely 
the desire to obtain higher wages, shorter 
hours of labor, or improved relations with 
their employers, but this enumeration does 
not, I take it, purport to cover all the ground 
which will lawfully justify members of an 
organization refusing in a body and by pre- 
arrangement, to work. The enumeration is 
illustrative rather than comprehensive, for 
the object of such an organization is to 
benefit all its members; and it is their right 
to strike, if need be, in order to secure any 
lawful benefit to the several members of the 
organization as, for instance, to secure the re- 
employment of a member they regard as hav- 
ing been improperly discharged, and to se- 
cure from an employer of a number of them 
emploj r ment for other members of their or- 
ganization who may be out of employment, 



COERCION BY LABOR UNIONS 81 

although the effect will be to cause the dis- 
charge of other employees who are not mem- 
bers." 

Another case that plainly holds for the 
union is Clemmitt v. Watson, (14 Ind. 
App. 38). In this case, a body of employees 
in a coal mine organized as a union and de- 
manded the discharge of a certain man not 
a member of their union. The owners refus- 
ing to discharge him, a strike was called; 
whereupon the employers yielded, and the 
man was discharged. A suit was thereupon 
brought by the man forced out to recover 
damages caused by the conspiracy. The gist 
of Mr. Justice Garvin's opinion was this: 
" There is no law to compel one man or any 
body of men to work for or with another who 
is personally obnoxious to them. We cannot 
believe it to be in accordance with the spirit 
of our institutions or the law of the land to 
say that a body of workmen must respond in 
damages because they, without malice or any 
evil motive, peaceably and quietly quit work 
which they are not required to continue, 
rather than remain at work with one who is 
for any reason unsatisfactory to them." 

Whatever weight may be given to these 
two decisions as authority, they represent 



82 THE CONTROL OF THE MARKET 

the view of the minority; for the contrary 
holding now undoubtedly has the majority. 
It is, therefore, the general American law 
that legal wrong is done by a union in pro- 
curing the discharge of a non-union man. 
Even if their motive is self-interest, to get all 
the work for their own members, still most 
courts hold that the union cannot be allowed 
to use the force of its members to crush the 
non-union man. The law of conspiracy from 
time immemorial has protected the single man 
against the attack of the combination. This 
is a modern instance for its application. Any 
discussion which leaves out the fact of con- 
spiracy, and defends the union upon the 
basis of the permission given individuals to 
compete as they please, misses the real point 
upon which the issue turns. To maintain 
free competition in general, the courts must 
prevent suppression of competition by the 
action of the combination. 

IX 

To suggest further distinctions, two of the 
most recent cases, to a certain extent op- 
posite in tendency, should be considered. 
One, Pickett V. Walsh (192 Mass. 572), is 
the most recent of the long line of excellent 



COERCION BY LABOR UNIONS 83 

decisions in Massachusetts dealing with the 
respective rights of capital and labor. The 
plaintiffs were brick and stone pointers; the 
defendants were officers and members of 
bricklayers' unions and stone masons' unions. 
One ground of complaint was that the plain- 
tiff was forced out of employment by the 
threat of the defendant unions that they 
would do no laying unless the pointing was 
done by their members. This policy Mr. 
Justice Loring held justifiable: " It was with- 
in the rights of these unions to compete for 
the work of doing the pointing, and in the 
exercise of their right of competition to re- 
fuse to lay brick and set stone unless they 
were given the work of pointing them when 
laid." The other ground of complaint was 
that the unions, in order to get these plaintiffs 
discharged from one job, threatened a strike 
upon other jobs. The court held that this 
was not justifiable: ''That strike has in it 
an element like that in the sympathetic strike, 
in a boycott, and in blacklisting, namely, — 
It is a refusal to work for A, with whom 
the strikers have no dispute, for the purpose 
of forcing A to force B to yield to the 
strikers' demands. In our opinion organized 
labor's right of compulsion and coercion is 



84 THE CONTROL OF THE MARKET 

limited to strikes on persons with whom the 
organization has a trade dispute; or to put 
it in another way, we are of opinion that a 
strike on A with whom the striker has 
no trade dispute to compel A to force B to 
yield to the strikers' demands is an unjusti- 
fiable interference with the right of A to 
pursue his calling as he thinks best." 

The other case in mind is Pierce v. Stable- 
men's Union (156 Cal. 70). This was an 
injunction procured in the course of a strike 
called to make the plaintiff unionize his 
stable. Unionizing being legal in itself in 
California, the upper court was clear that no 
injunction should be so broad as to prevent 
the bringing about of this result by mere 
representations, even when amounting to 
coercion. The real issue to their mind was 
whether boycotting and picketing should be 
allowed. As for the boycotting feature, the 
California court takes its position with the 
small minority which permit it in every form, 
primary as well as secondary. " Each rests 
upon the right of the union to withdraw its 
patronage from its employer and to induce 
by any fair means all persons to do the 
same; and in the exercise of those means, as 
the union would have the unquestioned rights 



COERCION BY LABOR UNIONS 85 

to withhold their patronage from a third per- 
son who continued to deal with their em- 
ployer, so they have the unquestioned right 
to notify such third person that they will 
withdraw their patronage if he continues so 
to deal." But as to picketing, the California 
court unexpectedly allies itself with the ma- 
jority of courts, which forbid all picketing, 
" peaceful " as well as " violent." " A picket 
in its very nature," said Mr. Justice Henshaw 
" tends to accomplish and is designed to ac- 
complish these very things. It tends to and 
is designed by physical intimidation to deter 
other men from seeking the places vacated by 
the strikers. It tends to and is designed to 
drive business away from the boycotted place, 
not by the legitimate means of persuasion, but 
by the illegitimate means of physical intimida- 
tion and fear." 



The issue is, then, whether what is per- 
mitted individuals should be permitted a com- 
bination. The minority say that, as one per- 
son in competition is permitted to refuse to 
deal with those who will not deal with them 
exclusively, even though the ruin of a rival 
follows, so a union ought to be allowed the 



86 THE CONTROL OF THE MARKET 

same course of action. But is it fair to say 
that concerted action is of the same nature as 
separate action? Certainly, it is the usual 
fact that individual competition may be met, 
while combined action is overwhelming. The 
truth is with the majority of the courts, that 
the combination gives to concerted action 
higher potentiality than separate action by 
individuals can ever have. Both boycotting 
and unionizing are conspicuous examples of 
the resistless force of numbers, and this un- 
derlying basis of fact is explanation enough 
of the substantial similarity of the way in 
which both are treated by the courts. Until 
individualism shall cease to be the predomi- 
nant theory, the courts will continue to hold 
unionizing wrong. Unionizing will not be- 
come legal unless the arguments for collec- 
tivism, shall ever command the adherence 
of the great majority of men. If that time 
comes, the law, it seems, must regulate the 
admission to the unions to which it would 
thus concede the control of the labor market. 
For regulation, as we shall see throughout 
this discussion, is the only basis upon which 
monopoly can be permitted. If, finally, the 
law should concede the closed shop, it very 
probably will require an open union. 



NOTE 

The position taken in this chapter that the non-union 
man is protected against the union is the law of the 
following jurisdictions at least: Maine — Perkins v. 
Pendleton, 90 Me. 166 (1897); Maryland— Lucke v. 
Clothing Cutters' Assembly, 77 Md. 396 (1893) ; Massa- 
chusetts—Plant v. Woods, 176 Mass. 492 (1900); Mich- 
igan — Beck v. Railway Teamsters' Protective Union, 118 
Mich. 497 (1898) ; Minnesota — Gray v. Building Trades' 
Council, 91 Minn. 171 (1903); Pennsylvania — Erdman 
v. Mitchell, 207 Pa. (1903). 

In the following jurisdictions the issue is in 
doubt: England— Allen v. Flood (1898), A. C. 1 and 
Perrault v. Gauthier, 28 Can. Sup. 241 (1897), are for 
the union, but Quinn v. Leathern (1901), A. C. 495 and 
Giblan v. National Amalgamated Union (1903) 2 K. 
B. 600, are distinctly for the non-union man; New York 
— Curran v. Galen, 152 N. Y. 33 (1897) and Davis 
Machine Company v. Robinson, 41 Misc. 329 (1903) 
are for the non-union man, but National Protective As- 
sociation v. Cumming, 170 N. Y. 315 (1902) and 
Davis v. United Hoisting Engineers, 28 App. Div. 396 
(1898), hold for the union. 

In the following jurisdictions at least the law permits 
the union to force the non-union man out: California — 
Pierce v. Stablemen's Union, 156 Cal. 70 (1909); Indi- 
ana — Clemmit v. Watson, 14 Ind. App. 38 (1895); 
Montana- — Lindsay v. Montana Federation, 37 Mont. 
264 (1908); New Jersey — Mayer v. Journeymen Stone- 
cutters' Association, 47 N. J. Eq. 519 (1890). 



87 



CHAPTER V 

PRESSURE BY TRADE COMBINATIONS 



Even to the most superficial observers of 
current events, it is clear that the competitive 
system is much threatened from many quar- 
ters. Undoubtedly the industrial order in 
the first half of the twentieth century is going 
to be a different thing from the business or- 
ganization of the first half of the nineteenth 
century; but whether this change is to be 
one in kind, or one merely in degree, remains 
to be seen. At the present moment, despite 
adverse movements, the substance of competi- 
tion is still to be found in the general course 
of most of industrial activities for the greater 
part of the time. This condition can be 
maintained if all the conservative forces of 
society are exerted; and among these one 
of the most potent is the law. The courts 
are manifesting the greatest activity at the 
present time at various points where the dis- 
turbing force of the predatory combination 

88 



PRESSURE BY TRADE COMBINATIONS 89 

is making itself felt. The principal issue 
is whether there is a difference between the 
methods in competition which may be em- 
ployed by an individual in competition, and 
the course of action that may be taken by a 
combination. For example, may a combina- 
tion engaged in competition refuse to have 
any business dealings with those who continue 
to have commercial relations with its rivals? 
It is obvious that if the combination be 
permitted to compete in this way (as in- 
dividuals may), the ruin of the rival, thus 
cut off from his sources of supply, will very 
often result. 



II 

As has been seen in an earlier chapter, the 
general legal theory of the most accurate ob- 
servers of these current industrial phenomena 
is that every person engaged in business has 
a legal right to his trade; consequently those 
who interpose themselves between a trader and 
the persons who would deal with him commit 
what is prima facie a wrong by this very 
interference. One who intermeddles with the 
business relations of another is thus put to 
his justification; and among the initiated, 



90 THE CONTROL OF THE MARKET 

therefore, the problem of legality has be- 
come a question of justification. As to the 
grounds upon which such justification may 
rest, there are many of these, as has already 
been indicated. For the present purpose it 
is enough that fair competition is an accepted 
excuse. But if the motive or the method 
be bad, it is not fair competition; and the 
justification consequently fails. A striking 
case of unfair action under this rule is the 
blacklist. In the case of Hundley v. Louis- 
ville & Nashville Railroad (45 S. W. Ky. 
439), it appeared that many railroads had 
agreed among themselves to refuse employ- 
ment to any man who was reported to their 
blacklist office (jointly maintained) as having 
ever been party to a strike. The court held 
that although any railroad might separately 
have adopted this policy, their combination to 
stand by this blacklist was another matter. 
It was thought to be plainly the policy of the 
law that a man should be free from molesta- 
tion in his business relations. The only 
thing lacking was a showing that he had 
actually been refused employment by reason 
of this combination against him. For, how- 
ever evil their intentions may have been, this 
complainant must show damage to him of 



PRESSURE BY TRADE COMBINATIONS 91 

some sort in order to have a standing in 
court. 

This law is shown again in Doremus v. 
Hennessy (176 111. 608). It was set forth 
in this complaint that the members of an 
organization known as the Chicago Laundry- 
men's Association had fixed a scale of prices 
for laundry work, and had conspired to injure 
the complainant in her good name and credit 
and to destroy her business because she would 
not charge prices in accordance with such 
scale. The court decided in her favor, Mr. 
Justice Phillips saying: "A combination by 
them to induce others not to deal with ap- 
pellee or enter into contracts with her, or 
to do any further work for her, was an action- 
able wrong. Every man has a right, under 
the law, as between himself and others, to 
full and free disposition of his own labor and 
capital according to his own free will, and 
anyone who invades that right without lawful 
cause or justification commits a legal wrong, 
and, if followed by an injury caused in con- 
sequence thereof, the one whose right is thus 
invaded has a legal ground of action for such 
wrong." Whenever, therefore, the operations 
of a combination in the course of competition 
are proved to be detrimental to the best in- 



92 THE CONTROL OF THE MARKET 

terest of society, its members may be held 
to be wrongdoers by reason of what they 
have done. For what is to be held fair in 
competition, and what is unfair, is by this 
analysis all a question of public policy, which 
may well be different in the case of concerted 
action than in the case of individual action. 



in 

It must be remembered that we have 
always to reckon with the established law 
for freedom in competition, and the 
undoubted desire for its maintenance. 
Competition is firmly believed, by the mass 
of men, to be worth more to society than its 
costs; and, therefore, so long as competition 
by a combination has no different effect upon 
the course of trade than competition by an 
individual has, it must be allowed to go on, 
however ruinous it may be to rivals in busi- 
ness. Not until we have a plain case where 
combined effort can be shown to be quite 
different in its operation from individual 
action, can the competition of a combination 
be held unfair, if similar methods are held 
fair enough for an individual. When this is 
so it will usually be seen that, in order to 



PRESSURE BY TRADE COMBINATIONS 93 

preserve the freedom of the individual in 
trade, the freedom of a combination must be 
curbed. 

Perhaps the most noteworthy case in this 
connection is Mogul Steamship Company v. 
McGregor (L. R. 23 Q. B. D. 598), because 
of the great opinion of Lord Justice Bowen. 
The facts of that case make it a crucial one. 
The defendants were a number of ship-own- 
ers who formed themselves into a league or 
" conference " for the purpose of ultimately 
keeping in their own hands the control of the 
tea carriage from certain Chinese ports, and 
for the purpose of driving the plaintiffs and 
other competitors from the field. In order to 
succeed in this object, and to discourage the 
plaintiffs' vessels from resorting to those 
ports, the defendants, during the " tea har- 
vest " of 1885, combined to offer to the local 
shippers very low freights, with a view of 
generally reducing or " smashing " rates, and 
thus rendering it unprofitable for the plain- 
tiffs to send their ships thither. Moreover, 
they offered a rebate of five per cent, to all 
local shippers and agents who would deal 
exclusively with vessels belonging to the con- 
ference — a rebate which would be forfeited 
if, at any time, outside ships were used. It 



94 THE CONTROL OF THE MARKET 

is impossible to give a fair impression of Lord 
Bowen's opinion by extracts from it; but his 
points may be shown. Considered as mere 
competition he found, as we have seen al- 
ready, no cause of action. On the point 
of combination as an element in the case, he 
could not see that this made any difference. 
It was perfectly legitimate, he thought, to 
combine capital for all mere purposes of trade 
for which capital might, apart from com- 
bination, be legitimately used in trade. As 
to his first point, it would seem that the same 
policy which permits an individual trader to 
cut prices to any extent, although his rival 
is thereby ruined, would allow a combination 
to lower rates in competition against its 
rivals. Indeed, looked at from one point of 
view, the public is benefited more when many 
lower prices than it is when a single man 
does; and a rival must meet the low price 
made by his combined rivals as he must the 
reduced rate of a single opponent, or else go 
out of business. But as to the second point 
— query. Shall a combination be permitted 
to take the attitude that they will charge a 
higher price to those who deal with a rival — 
may a rival who is thus driven out of business 
say that this is unfair competition? This 



PRESSURE BY TRADE COMBINATIONS 95 

issue must again be decided upon the balance 
of social advantage, and requires, therefore, 
the fuller discussion which it receives in this 
and later chapters. 

A rather similar case is John D. Park & 
Sons Company v. National Wholesale Drug- 
gists' Association et. all. (175 N. Y. 1). The 
facts in that case in brief were these: The 
manufacturers of certain proprietary medi- 
cines and an association of wholesale dealers 
therein entered into an agreement to sell 
the goods at a uniform jobbing price for fixed 
quantities only to such dealers as would con- 
form to the manufacturers' price list in mak- 
ing sales of goods. All wholesale dealers had 
the right to purchase the goods from the 
manufacturers upon the same terms as mem- 
bers of the association, on agreeing to main- 
tain the prices established by the manufac- 
turers. The complainants were unwilling to 
maintain the trade prices upon the medicines 
they purchased; and they brought this com- 
plaint for being charged the " long " price, 
alleging that it was by reason of the conspir- 
acy of the defendants that they were unable 
to get the discount rate. The case was 
finally dismissed in the Court of Appeals, 
upon a course of reasoning which may be 



96 THE CONTROL OF THE MARKET 

seen in the following extracts from the 
opinion of Mr. Justice Haight: ''Is 
this plan against public policy? An active 
competition and rivalry in business is 
undoubtedly conducive to the public wel- 
fare; but we must not shut our eyes to the 
fact that competition may be carried to such 
an extent as to accomplish the financial ruin 
of those engaged therein, and thus result in 
a derangement of the business, an incon- 
venience to consumers, and in public harm." 
The argument for the validity of special 
favors by a combination is stated most at- 
tractively when it is said that there is no real 
pressure exerted by the combination upon 
anyone; simply those outside the combination 
get an advantage if they accept the terms, 
while they do not get the benefit of the con- 
cession unless they conform to the rules. 



IV 

Cases now engage our attention where the 
disturbance of the industrial peace by the 
coercion exerted by a combination in its com- 
petition is much more serious. What, un- 
fortunately, is a typical case is seen in Jack- 
son v. Stanfeld (157 Ind. 592). Jackson was 



PRESSURE BY TRADE COMBINATIONS 97 

a broker engaged in buying and selling lum- 
ber; Stanfeld was a member of a retail lum- 
ber dealers' association. The rules of this 
association provided that, if a wholesale 
dealer should sell lumber direct instead of 
through retailers who owned lumber yards, 
all the members of the association of the re- 
tailers would, upon notice, refuse to have 
further dealings with such a wholesaler. In 
holding this a conspiracy, Mr. Justice Dailey 
said: "The great weight of authority sup- 
ports the doctrine, that where the policy 
pursued against a trade or business is cal- 
culated to destroy or injure the business of 
the person so engaged either by threats or 
by intimidation, it becomes unlawful, and the 
person inflicting the wrong is amenable to 
the injured party in a civil suit for damages 
therefor. It is not a mere passive, let-alone 
policy, a withdrawal of all business relations, 
intercourse, and fellowship, that creates the 
liability, but the threats and intimidation in- 
volved in it." 

A more recent phase of the same problem is 
seen in the late case of Brown & Allen v. 
Jacobs Pharmacy Company (115 Ga. 429). 
Jacobs, the plaintiff, had formerly been a 
member of the local branch of the Retailers' 



98 THE CONTROL OF THE MARKET 

Association in Atlanta ; but he had withdrawn 
from it upon charges being preferred against 
him for violation of its rules. The Atlanta 
Retailers' Association thereupon sent a letter 
to the Wholesalers' Association, representing 
that no retailer in the local association would 
buy of any wholesaler who sold to the rate 
cutter. Mr. Justice Fish promptly granted 
an injunction against such concerted action. 
" The individual right is radically different 
from the combined action. The combination 
has hurtful powers and influences not pos- 
sessed by the individual. It threatens and 
impairs rivalry in trade, covets control in 
prices, seeks and obtains its own advancement 
at the expense and in the oppression of the 
public. The difference, in legal contemplation, 
between individual right and combined action 
in trade, is seen in numerous cases. To pro- 
tect the individual against encroachments 
upon his rights by a greater power is one of 
the most sacred duties of the courts." 

We have seen, then, that the law, as de- 
clared by the majority of courts, is to the 
effect that when a combination exerts its 
force upon outside dealers to prevent them 
from having any relations with rivals of the 
combination, the rivals have an action for the 



PRESSURE BY TRADE COMBINATIONS 99 

damages caused by the interference. This 
law is applied, by the majority of courts, as 
it seems, consistently, when the power of the 
combination is brought to bear upon its own 
members to prevent them from having any 
dealings with those outside the combination. 
The same elements of wrong exist whether 
the attack of the conspirators upon their vic- 
tim is indirect or direct. And the key to the 
general problem under discussion seems to 
be this, that coercion of the sort discussed 
here is wrong in itself, like fraud, and there- 
fore, like fraud, an unfair method to use 
in competition. And conspiracy will always 
be considered to be a continuing wrong of 
which the law will take notice so long as it is 
true that an organized force has the power to 
overwhelm unorganized individuals. This 
principle of law that we have under discussion 
has therefore this foundation of fact, that a 
concerted refusal to deal disturbs the indus- 
trial order in a way which an individual 
refusal never can. 



To be quite fair, it must be admitted that 
there is conflict of authority upon these mat- 
ters. There are courts which hold that a 



100 THE CONTROL OF THE MARKET 

combination can use its force to drive the 
customers of a rival away; and these should 
be given a hearing if this investigation is to 
be conducted impartially. One of the stron- 
gest of these cases is MacCauley Bros. v. 
Tierney (19 R. I. 255). The complainants 
were master plumbers, engaged in business 
in Providence; the respondents were officers 
of the Providence Master Plumbers' Asso- 
ciation, a body affiliated with a national asso- 
ciation. This general association had adopted 
resolutions that they would withdraw their 
patronage from any firm manufacturing or 
dealing in plumbing material, which sold to 
others than members of the affiliated associa- 
tion. The enforcement of this resolution by 
the officers was so strict that complainants 
were almost driven out of business after they 
had refused to join the local association and 
be bound by its rules. Chief Justice Matte- 
son refused to grant an injunction. He said 
in part: " The cause and excuse for the send- 
ing of the notices, it is evident, was a selfish 
desire on the part of the members of the 
association to rid themselves of the competi- 
tion of those not members, with a view to in- 
creasing the profits of their own business. 
The question, then, resolves itself into this: 



PRESSURE BY TRADE COMBINATIONS 101 

Was the desire to free themselves from com- 
petition a sufficient excuse in legal contem- 
plation for the sending of the notices? We 
think the question must receive an affirmative 
answer. Competition, it has been said, is 
the life of trade. Every act done by a 
trader for the purpose of diverting trade 
from a rival and attracting it to himself is 
an act intentionally done and, in so far as it 
is successful, to the injury of the rival in his 
business, since to that extent it lessens his 
gains and profits. To hold such an act 
wrongful and illegal would be to stifle com- 
petition." 

A more recent case, with more complication 
in the facts, is Scottish Cooperative Whole- 
sale Society v. Glasgow Fleshers' Trade De- 
fense Association (35 Scottish Law Reporter, 
645). Certain butchers of Glasgow were 
the members of the defendant association; 
a system of cooperative stores formed the 
constituency of the plaintiff association. 
The fleshers set about it to drive the stores 
out of the meat business. It appeared that 
the imported meat market was carried on at 
only one place in Scotland, at the Yorkhill 
Wharf in Glasgow, where the meats were 
sold by the importers at auction. The asso- 



102 THE CONTROL OF THE MARKET 

ciation considered that they would attain their 
object if they could induce the cattle sales- 
men who were used to sell the cattle at 
Yorkhill, to refuse to sell to the cooperative 
stores. The cattle salesmen yielded to the 
pressure, and the defendants thereby forced 
the plaintiffs out of that line of business. 
Lord Kincairney, who heard the case, did not 
see anything that could be done about it. 
" After all, the name does not signify. A 
conspiracy, combination, or association, is, 
after all, nothing but a kind of contract. 
But, assuming conspiracy, it is not easy 
to see what the first defenders did which 
could subject them in damages. They w r ere 
entitled to resolve to abstain from bidding 
at sales at which cooperative bids were re- 
ceived. It was entirely at their option to 
do that or not. It appears to me that the 
fleshers acted within their legal rights. It 
may be regrettable that they happened to 
have so much in their power. That is the 
accident of their position, and of the peculiar 
character of the foreign cattle market." 

The reasoning of these cases, and of the 
others that are like them, is obvious — too 
simple in view of the complexity of the prob- 
lem. It is said that A has a right to refuse 



PRESSURE BY TRADE COMBINATIONS 103 

to deal with B, unless he will deal with him 
exclusively; therefore A and others with him 
have a right to refuse to deal with B, unless 
he will deal with them exclusively. So it is 
said, however outrageous the result, the logic 
of the law must not be set aside. Under- 
neath affirmation of this sort lurks doubt; 
for if the result is wrong the course of reason- 
ing must be. There is the intermediate as- 
sumption that the individual refusal by a 
single man is of the same character as a 
concerted refusal by many men. This may 
well be challenged as law, since it is con- 
trary to fact. Even if it were in the face of 
the logic of the law, most men would call 
this competition unfair. For most men 
firmly believe in the perpetuation of the open 
market; and they realize that if a combina- 
tion may work its will in this way, the end of 
industrial liberty is at hand. 



VI 

The true method of approaching this prob- 
lem, it should be reiterated, is by way of 
justification; we are not examining absolute 
rights, but relative rights. This is well put 
in Delz v. Winfree (80 Tex. 400), where 



104 THE CONTROL OF THE MARKET 

the cause of action stated in the petition was 
that several persons had induced others not 
to sell to the petitioner live animals for cash, 
whereby he was greatly injured in his busi- 
ness as butcher. As to the legality of this, 
Associate Justice Henry said, in part: " The 
appellee also asserts the following proposi- 
tion, which may be conceded to be correct: 
' A person has an absolute right to refuse to 
have business relations with any person 
whomsoever, whether the refusal is based 
upon reason or is the result of whim, caprice, 
prejudice, or malice, and there is no law 
that forces a man to part with his title to his 
property.' The privilege here asserted must 
be limited, however, to the individual action 
of the party who asserts the right. It is not 
equally true that one person may, from such 
motives, influence another person to do the 
same thing." 

Granted that we have under discussion a 
case of pure business motive, not of personal 
spite, it becomes a question, therefore, what 
course of action shall be justified, and what 
methods shall be held to be opposed to public 
policy. An excellent recent case attacks the 
problem upon that basis — Bailey V. Master 
Plumbers' Association (103 Tenn. 99). This 



PRESSURE BY TRADE COMBINATIONS 105 

was one of the typical cases — the defendants, 
members of an association with by-laws for- 
bidding its members to purchase from deal- 
ers who sold to outsiders, the plaintiff, one 
forced out of business by this sort of com- 
petition. And whether this is fair or unfair 
competition was again the question. The 
court — Mr. Justice Caldwell writing the 
opinion — says in one place: " In our opinion, 
it does not follow from this undoubted free- 
dom of the individual member and individual 
dealer that all of the members may, as ruled 
in those cases, lawfully enter into a general 
and unlimited agreement, in the form of by- 
laws, that they, and all of them, will make 
their purchases from only such dealers as 
will sell to members exclusively. The premise 
does not justify the conclusion." 

If, then, this is all a matter of justifica- 
tion, the existing law may be explained by 
saying that perhaps an individual in com- 
petition may be allowed to refuse to deal with 
those who deal with his rival without danger 
to the industrial order, while certainly a great 
combination may not be allowed to use the 
same method without disturbance of the 
industrial peace. But is the method really 
the same when there is refusal by an in- 



106 THE CONTROL OF THE MARKET 

dividual? It seems the real truth that the 
very concert gives combined action a higher 
potentiality for harm than individual action 
ever can have. Formal logic does not now 
support the minority view that the combina- 
tion is as free to act in this way as an in- 
dividual is. And public policy certainly 
seems to be with the majority view that the 
individual trader should be protected against 
the pressure of the combination which is 
breaking up his business relations with those 
who might otherwise deal with him. The 
reality of such oppression carries with it, in 
most minds, the conviction of the essential 
wrongfulness of such dictation by the com- 
bination. 

VII 

By some observers of these cases a differ- 
ence is suggested between the situation just 
under examination, where the coercion of the 
combination is exercised upon third parties 
outside of the combination, and what seems 
to them another state of affairs where an out- 
side party is injured solely by the pressure of 
the members of an association upon each 
other. It is urged here for the last time that 
what one may do alone, he may join with 



PRESSURE BY TRADE COMBINATIONS 107 

others to do. But this is not a safe course 
of reasoning, as has already been seen. 
Therefore the cases that present this differ- 
ence should be scrutinized to see if there 
really is any such distinction as that which 
is attempted. 

One of the leading cases of those, which was 
decided for the combination, is Bohn Manu- 
facturing Company v. Hollis (54 Minn. 223). 
It appeared in this case that a large number 
of retail lumber dealers had formed a volun- 
tary association, by which they mutually 
agreed that they would not deal with any 
manufacturer or wholesale dealer who should 
sell lumber directly to consumers, not dealers, 
at any point where a member of the associa- 
tion had a retail yard; and they provided 
in their by-laws that, whenever any whole- 
saler, dealer, or manufacturer made any such 
sale, the secretary should notify all the mem- 
bers of the fact. The plaintiff, a wholesaler, 
having made such a sale directly to a cus- 
tomer, the secretary threatened to send notice 
of the fact, as provided in the by-laws, to 
all the members of the association. The 
opinion of Mr. Justice Mitchell is such in- 
teresting reading that another extract may 
be pardoned: ''There is, perhaps, danger 



108 THE CONTROL OF THE MARKET 

that, influenced by such terms of illusive 
meaning as ' monopolies/ ' trusts/ ' boy- 
cotts/ ' strikes/ and the like, the courts 
may be led to transcend the limits of their 
jurisdiction, assume that, on general prin- 
ciples, they have authority to correct or re- 
form everything which they may deem wrong, 
or, to manage the State. Now, when reduced 
to its ultimate analysis, all that the retail 
dealers, in this case, have done, is to form 
an association to protect themselves from 
sales by wholesale dealers or manufacturers, 
directly to consumers or other non-dealers, at 
points where a member of the association is 
engaged in the retail business." 

Another rather extraordinary case to the 
same effect is Brewster v. Miller's Sons Com- 
pany (101 Ky. 368). This was a suit against 
the members of the Funeral Directors' Asso- 
ciation of Louisville. The wife of the plain- 
tiff Brewster died; he went to the defendants, 
C. Miller's Sons, to engage their services for 
her burial. They refused to act, because, as 
they claimed, the plaintiff was already in- 
debted to them. The other defendants re- 
fused to perform the necessary services be- 
cause of this claim of C. Miller's Sons that 
Brewster was indebted to them for previous 



PRESSURE BY TRADE COMBINATIONS 109 

services, according to the rules of the Funeral 
Directors' Association. The court — Mr. 
Justice Paynter wrote the opinion — could 
find nothing wrong in this; it said: "If 
one has, on a previous occasion, received 
the services of the undertaker, and his ma- 
terial, and has refused or failed to pay the 
bill, it is certainly not unreasonable to re- 
fuse to permit him services. To afford 
mutual protection against such persons it 
is not unlawful for the undertakers of the 
community to associate themselves together 
and agree to refuse to render a like service 
to one who has refused or failed to pay 
such expenses in the past to some member 
of the association." 

VIII 

One of the best reasoned cases upon this 
whole general problem remains to be stated, 
Martell v. White (185 Mass. 255). It 
plainly appeared in this case that the Granite 
Manufacturers' Association, of which de- 
fendants were members, had a by-law that 
prohibited under penalty any member from 
having business transactions with non-mem- 
bers. Most of the customers of the plain 7 
tiff were members of the association, and 



110 THE CONTROL OF THE MARKET 



after some of them had been fined by the 
association for dealing with him, the rest 
declined to deal with him further. The opin- 
ion of Mr. Justice Hammond in this case is 
so excellent in its grasp of the general sit- 
uation, as it stands at the present moment, 
that it would be well if all of it could be 
printed here: " Nothing need be said in sup- 
port of the general right to compete. To 
what extent combination may be allowed in 
competition is a matter about which there is 
as yet much conflict, but it is possible that in 
a more advanced stage of the discussion, the 
day may come when it will be more clearly 
seen and will more distinctly appear in the 
adjudication of the courts than as yet has 
been the case, that the proposition that what 
one man lawfully can do, any number of 
men, acting together by combined agreement, 
lawfully may do, is to be received with newly 
disclosed qualifications arising out of the 
changed conditions of civilized life and of the 
increased facility and power of organized 
combination, and that the difference between 
the power of individuals acting each accord- 
ing to his preference, and that of an or- 
ganized and extensive combination, may be 
so great in its effect upon public and private 



PRESSURE BY TRADE COMBINATIONS 111 

interests as to cease to be simply one of de- 
gree and to reach the dignity of a difference 
in kind." 

In the latest case in Massachusetts, Davis 
v. The Publishing Company (203 Mass. 
470), the matter of combination was reduced 
to its simplest terms, there being but two in 
the combination complained of. It appeared 
from the complaint that the plaintiff express- 
man had been excluded from the list in the 
publication of one of the defendants, by the 
machinations of two of his competitors, the 
remaining defendants, but Mr. Justice 
Knowlton said as to the plaintiff — " the gist 
of the plaintiff's action is the wrong done 
him by intentionally turning away from him 
those who otherwise would do business with 
him." And as to the defendants he said — 
" their desire to advance their own interests in 
competition is not a justification for attempt- 
ing to interfere with the plaintiff's business 
by misstatements, and the making of a false 
and misleading publication." The law will, 
therefore, move against any combination, 
large or small, which is in any way, directly 
or indirectly, seeking to destroy the business 
of a rival by using the force of its organiza- 
tion to drive his customers from him. 



112 THE CONTROL OF THE MARKET 

IX 

Underlying this refusal to justify the sort 
of competition which is now under discussion 
is the general public policy against monopo- 
lization. It is opposed to present ideals that 
a combination should be allowed to employ 
methods which will enable it to gain control 
of its market. This is the real explanation 
why the courts, by a considerable majority, 
have declared that a combination cannot bring 
its organized force to bear upon an individual 
rival so as to cut him off from his source 
of supplies. When it is more or less true 
that any man may enter any business upon 
his merits, the perpetuation of the open mar- 
ket is assured. But if men in business are 
left at the mercy of the predatory trusts, the 
combinations would practically have a perma- 
nent hold upon the industries. And to the 
majority of men an end of competitive con- 
ditions in the ordinary businesses would seem 
the final catastrophe, beyond which there 
could be nothing but the horror of anarchy 
or the hopelessness of socialism. It is be- 
cause of these perils to society that we are 
finding to-day such agreement as to the pro- 
priety of regulation of the industrial situa- 



PRESSURE BY TRADE COMBINATIONS 113 

tion by law. A very great change this is, 
from the doctrines of laissez faire of the early 
nineteenth century to the principles of state 
control in this early twentieth century. 



NOTE 

The plaintiff thus injured in his business was given 
a remedy in: Georgia — Brown v. Jacobs Pharmacy Co., 
115 Ga. 429 (1902); Illinois — Doremus v. Hennessy, 
176 111. 608; Indiana — Jackson v. Stanfeld, 137 Ind. 
592 (1893); Maryland— Klingel v. Sharp, 104 Md. 
218; Massachusetts — Martell v. White, 185 Mass. 255 
(1906); Minnesota — Ertz v. Produce Exchange, 79 
Minn. 140 (1900); Missouri — Walsh v. Assn. of Master 
Plumbers, 97 Mo. App. 280 (1902); New Jersey — Barr 
v. Essex Trades Council, 53 N. J. Eq. 101 (1894); 
Ohio— Mattison v. L. S. & M. S. Ry. Co., 3 Ohio Dec. 
526 (1895); Tennessee — Bailey v. Master Plumbers' 
Assn., 103 Tenn. 99 (1899); Texas— Olive v. Van 
Patten, 7 Tex. Civ. App. 630 (1894); Vermont— Bout- 
well v. Marr, 71 Vt. 1 (1896); Wisconsin — Hawarden 
v. Youghiogheny Coal Co., Ill Wis. 545 (1901). 

The defendants were not held liable in: Colorado — 
Master Builders' Ass'n v. Domascio, 16 Col. App. 25 
(1901); Kentucky — Brewster v. Miller's Sons Co., 101 
Ky. 368 (1897); Minnesota— Bohn Mfg. Co. v. Hollis, 
54 Minn. 223 (1893); Rhode Island — MacCauley Bros. 
v. Tierney, 19 R. I. 255 (1898); West Virginia Trans- 
portation Co. v. Standard Oil Co., 50 W. Va. 61 1 
(1902). 

In certain jurisdictions the decisions are hard to 
reconcile: England, up to the time of Quinn v. Leathern 
(1901), A. C. 495, was not opposed to such action by a 
combination (cf . Boots Co. v. Grundy, 82 L. T. 769) ; 

115 



116 NOTE 

but it now seems that the particular issue here involved 
would fall under the rule of this latest case and be 
decided against the combination. The same observations 
apply to Scottish Cooperative Soc. v. Glasgow Fleshers' 
Ass'n, 35 Sc. Law Reporter 64<5, which was decided for 
the defendants, while Allen v. Flood (1898), A. C. 1, 
was still good law. New York — The courts, upon the 
whole, have favored the combination in late years (see 
Park v. Wholesale Druggists' Ass'n, 175 N. Y. I., 
1903) ; but the latest decision is for the individual thus 
injured, Straus v. American Publishers' Ass'n, 177 N. Y. 
473 (1903). 



CHAPTER VI 

CONTRACTS IN RESTRAINT OF TRADE 



It has been remarked that whenever 
there is an accepted belief among men that 
strict adherence to certain policies is necessary 
for their industrial salvation, that belief has 
already become a principle of the law. In 
dealing with the eternal problem of com- 
petition and combination, the judges have the 
same social imagination as other men. And 
as the most of men still think that competi- 
tion in general is a good, the most of courts 
yet consider combination an evil. Whether 
or not it is true that a contract in restraint 
of trade is against the better interests of the 
community, as the law has always held, may 
be judged from the many and various in- 
stances of schemes to control the market re- 
lated in this chapter. 

ii 

From the Common Pleas in the year 1415 
this case is reported: "Writ of debt was 

117 



118 THE CONTROL OF THE MARKET 



brought on an obligation of one John Dier, 
in which the defendant declared upon a cer- 
tain indenture which he set forth, on con- 
dition that if the defendant did not use his 
art of dier's craft within the town where the 
plaintiff, etc., for a certain time, to wit, half 
a year, the obligation should lose all force, 
etc., and said that he did not use his art of 
dier's craft in the time limited, which he 
averred and prayed judgment, etc. Hull. — 
In my opinion you might have demurred 
upon him, that the obligation is void, for that 
the obligation is against the common law, 
and by God, if the plaintiff were here, he 
should go to prison until he paid a fine to the 
king." From that day to this every contract 
in total restraint of trade has been held 
invalid. 

Our law has never been free from the fear 
that such agreements might result in serious 
disturbance of the ordinary processes of com- 
petition. This fear was well founded in 
ancient times, when the market was small; 
for England had not yet changed from a 
local economy, where each community was 
sufficient to itself, into a national economy 
which implied interchange of goods between 
distant communities. It was nearly two cen- 



CONTRACTS IN RESTRAINT OF TRADE 119 

turies before the concession was made that 
any contracts restraining competition could 
be legal; but with expanding trade, commer- 
cial conditions arose which made it necessary 
that some distinctions should be made. In 
Jelliet v. Broade, for example (as reported by 
Noy, page 98), " J sells goods to B for 
$200, and, in consideration of that bargain, 
B promises that he will not exercise the trade 
of a mercer in such a village. But after B 
uses it there, and J brought an action on the 
case, and resolved by the court that it well 
lies, for it was a voluntary promise for a 
good consideration, and it is restraint as to 
a place. Otherwise if it had been a general 
restraint or upon a co-action or without con- 
sideration." Partial restraint was thus dis- 
tinguished from total restraint, and this dis- 
tinction served for centuries to mark the line 
dividing what was permissible from what was 
forbidden. 

In the early days in many a small town 
it was quite possible for one man to con- 
trol all of a given commodity in his mar- 
ket, which he could then sell again at his 
own price. So restricted were the sources 
of supply to a given market in those early 
times that these offenses constituted real dan- 



120 THE CONTROL OP THE MARKET 

gers to the local consumers. But with a 
widening economy these dangers ceased and 
this law became obsolete as time went on. 
Practices such as these were indictable of- 
fenses in these early times. It was against 
the public peace that the market should be 
thus disrupted. Hence, in most of the 
assizes, inquiry was made if such schemes to 
control the market were on foot in the com- 
munity. What was feared at the outset was 
any reversion to monopolistic conditions by 
artificial restraints upon what would other- 
wise be the regular course of the competitive 
market. To keep that market open the law 
now exercised every diligence, as the rapid 
development of special law against certain 
practices abundantly showed. 

It was then that forestalling and regrating 
became recognized offenses. Forestalling was 
interference with the course of trade at 
the earlier stage, where designing persons 
went out on the roads leading to market and 
bought whole wagon loads of wheat from a 
farmer who was bringing it to market, their 
intention being to resell the wheat in that 
market at a profit. Similarly regrating was 
the work of undesirable citizens who 
went boldly into the market and bought more 



CONTRACTS IN RESTRAINT OF TRADE 121 

provisions than they needed for their own 
consumption, with intent to sell again in the 
same market. There were two other offenses 
of this sort against trade, engrossing and 
monopolizing, which deserve perhaps more 
attention, as these engaged the business sa- 
gacity and larger capital of the bigger men. 
Usually, such only could buy up great quan- 
tities of a staple to hold until the price should 
be enhanced or make many forward contracts 
for the delivery of growing crops. It will 
be seen presently that this old law against 
monopolization in all its forms has had re- 
newed significance in recent times. 



in 

In the earlier cases the policy against any 
real restraint of trade, and against monopo- 
lization in any form whatsoever, was main- 
tained on every occasion, whatever the cir- 
cumstances. The judges still spoke in un- 
compromising terms; the time for making 
distinctions had not come yet. For example, 
in Claygate v. Batchelor (Owen, 143), in re- 
fusing to enforce an agreement that one 
tradesman should not do business in a certain 
town, Anderson, J. ? reached the height of 



122 THE CONTROL OF THE MARKET 

his fulmination by saying that " he might as 
well bind himself that he would not go to 
Church!" 

In the great Case of Monopolies (11 Rep. 
84) , Popham and all his court resolved against 
the Queen's grant: "That it is a monopoly, 
and agains.t the common law. All trades as 
well mechanical as others which prevent idle- 
ness (the bane of the Commonwealth) and 
exercise men and youth in labor for the 
maintenance of themselves and their families, 
and for the increase of their substance, to 
serve the Queen when occasion shall require, 
are profitable to the Commonwealth, and 
therefore a monopoly of them is against 
the common law and the benefit and liberty 
of the subject." 

Until well toward the end of the eight- 
eenth century our law dealt with restraint 
of trade in an uncompromising manner. 
But before the middle of the nineteenth 
century it had been discovered that the law 
could not be too arbitrary without hamper- 
ing business too much; and it was found 
necessary to moderate it by making certain 
distinctions. There thus was brought about 
in various ways enough modification of the 
primary rule against contracts affecting com- 



CONTRACTS IN RESTRAINT OF TRADE 123 

petition, so that toward the end of the cen- 
tury the generalization might fairly be made 
that it was only unreasonable contracts which 
directly suppressed competition which should 
be held void, while reasonable arrangements 
which still left the contracting parties a cer- 
tain independence might be valid. It was 
by this modern method of making distinc- 
tions that it was held in an early Florida 
case that pilots might make an agreement 
among themselves that the courts would en- 
force as to the order in which they should 
take the station, Judge Baltzell taking occa- 
sion to extol modern cooperation as that 
which " distinguished civilized from savage 
life." 

In the same wise spirit of compromise, 
Chief Justice Shaw in Massachusetts de- 
cided that laborers " could not be prosecuted 
for merely going upon a strike for higher 
wages, although the preconcert was ad- 
mitted." Many other illustrations might 
be cited, if space permitted, of the reasonable 
modification of the common law during the 
nineteenth century until it finally presented 
a working compromise between the two de- 
sirable policies of safeguarding competition 
and utilizing combination. And this had 



124 THE CONTROL OF THE MARKET 

come from a general recognition, after ma- 
ture reflection upon the known course of 
economic history, that in competition and 
combination we have two eternal forces, and 
it should be the object of the law to accom- 
modate them, with due regard to the vital 
needs of the business community. 



IV 

An interesting plot in modern times to 
hold up the market is seen in Pacific Factor 
Company v. Adler (90 Cal. 110). In that 
case the plaintiff had got an option from the 
defendant for the delivery of some 200,000 
grain bags and was attempting to enforce it. 
The defense was that the plaintiff entered 
into contracts with other holders of grain 
bags in all respects similar to the contract 
made with the defendant to the amount of 
30,000,000 bags, with intent to monopolize 
the market. Mr. Justice Garoutte affirmed 
the non-suit, making this general argument 
against the monopolizing company: " It 
held the bag market in its hands, for com- 
petition was gone, and the price demanded 
must be paid. These agreements were not 
entered into for the purpose of aggregating 









CONTRACTS IN RESTRAINT OF TRADE 125 

capital, nor for greater facilities in the con- 
ducting of their business, nor for the pro- 
tection of themselves by a reasonable re- 
straint upon active competitors, but for the 
purpose of regulating, controlling and with- 
holding the supply of bags, and thereby to 
take an unjust advantage of the farmers' 
necessities, by disposing of the fruits of its 
unlawful labors at an unreasonable advance 
in price." 

Even a modern market may be tempo- 
rarily disturbed by such accumulation, and 
the normal price may be decidedly enhanced 
by such monopolization. Occasionally a 
case like Wright V. Cudahy (168 111. 86) 
appears in our law reports to remind us of 
the persistence of the policy against monopo- 
lization. In that case a pork " corner " was 
engineered with some success, but the court 
refused to force one of the parties to divide 
the ill-gotten gains. Upon the whole those 
who attempt to corner the modern market 
usually fail at the very moment of their 
apparent success. That fate generally over- 
takes them which almost invariably befalls 
any one man, however powerful, who at- 
tempts to injure all. This law has all but 
disappeared, as the market has expanded 



126 THE CONTROL OF THE MARKET 

until it has gotten almost beyond the power 
of any one man to corner it. But this law 
remains against aggregations of capital which 
often are large enough to take control even 
of the modern market for a time. 



Upon this vexed question of combination 
in restraint of trade, one of the leading cases 
in America is India Bagging Association v. 
Kock (14 La. Ann. 168). The facts, as 
they appear from the finding of the court, 
are as extreme as can be imagined. An asso- 
ciation was formed of eight firms in New 
Orleans, holders of large stocks of India 
bagging, and by agreement the subscribers 
bound themselves not to sell any bagging 
whatever for three months, except by vote 
of the majority. Mr. Justice Buchanan dis- 
missed a suit by the association against a 
member who sold in violation of the agree- 
ment in a peremptory manner: " This is a 
case which ought never to have come be- 
fore us. The agreement between the parties 
was palpably and unequivocally' a combina- 
tion in restraint of trade, and to enhance 
the price in the market of an article of pri- 



CONTRACTS IN RESTRAINT OF TRADE 127 

mary necessity to cotton planters. Such com- 
binations are contrary to public order, and 
cannot be enforced in a court of justice." 

This is a case of total suppression of trade 
for the time being; nothing, therefore, can 
save it from the condemnation of the law. 
And it is obvious in a case like this how 
necessary it is to have unequivocal law to 
deal with such a situation. It is hardly too 
harsh to brand men, who confederate in this 
way to withhold all supplies from the market, 
as enemies to society. The courts properly 
treat such parties when they come before 
them as outlaws. Upon the whole, few rules 
in our public policy have been so thorough- 
going as this against restraint of trade. And 
it does not change the law if the effects of 
that agreement may be limited to a certain 
extent by the competition of parties out- 
side the agreement. It is enough to con- 
demn the agreement, if, as between the par- 
ties, the restraint is total. The law con- 
siders all contracts between competitors to 
limit their competition as bad in principle. 

The restraint of trade thus is as obnoxious 
to a modern court as ever, as Tuscaloosa Ice 
Company v. Williams (127 Ala. 110), one 
of the latest cases, shows. The complaint 



128 THE CONTROL OF THE MARKET 

recited that by the terms of an agreement 
between the plaintiff and defendant, the first 
party was to pay $875 a year and the second 
party was to shut down his ice machine for 
five years. The court held the whole con- 
tract so clearly bad as to be altogether un- 
enforceable, Mr. Justice McClellan saying: 
" It tends to injure the public by stifling 
competition and creating a monopoly. It 
operated not only to put in the power of 
the covenantee to arbitrarily fix prices, but 
directly and necessarily to create a partial 
ice famine, upon which the defendant com- 
pany could batten and fatten at its own sweet 
will. That a monopoly was created is clear 
beyond all dispute. That ends the case 
against the validity of the covenant." 



VI 

Against all real restraint of trade the law 
is still set; and often it frustrates the plans 
of the conspirators when it is least expected. 
Take for an example the lowly case of 
Chapin v. Brown Bros. (83 Iowa, 156). The 
facts are petty, yet the issue is involved. All 
that appears is that by an arrangement be- 
tween the storekeepers in a country town it 






CONTRACTS IN RESTRAINT OF TRADE 129 

was agreed that all of them should stop buy- 
ing butter of the farmers, except one of 
them, who should share his profits with them. 
This deprived the farmers of the benefit of 
the competition of the buyers, as one sees. 
Justice Rothrock refused to enforce this con- 
tract; he said: " It plainly tends to monopo- 
lize the butter trade at Storm Lake, and 
destroy competition in that business. It is 
not necessary that the enforcement of the 
agreement would actually create a monopoly 
in order to render it invalid, and surely where 
all the dealers in a commodity in a certain 
locality agree to quit the business, and the 
plaintiffs are installed as the only dealers 
in that line, the tendency is, for a time at 
least, to destroy competition, and leave the 
plaintiffs as the only dealers in that species 
of property in that locality." 

A precious scheme is that disclosed in Mil- 
waukee Masons and Builders' Association v. 
Niezerowski (95 Wis. 129). This was an 
action on a note to which it was pleaded as 
making out a defense upon grounds of pub- 
lic policy. That the note was given by the 
defendant, a builder, to the plaintiff, the 
association, in pursuance of its requirements 
that every successful bidder for contracts 



130 THE CONTROL OF THE MARKET 

in Milwaukee should pay over to the asso- 
ciation six per cent, of the contract price. 
The showing of such a scheme was enough 
for Mr. Justice Pinney: " The combination 
in question is contrary to public policy, and 
strikes at the interests of those of the public 
desiring to build, and between whom and 
the association or the members thereof there 
exist no contract relations. While all reason- 
able stipulations and means to protect labor 
or trade are laudable, we must hold that the 
means here sought to be employed are such 
as the law will not sanction. We must 
consider what may be done under such an 
agreement, and the result which it will neces- 
sarily produce. As already pointed out, 
the operation of this combination, under its 
private by-laws, is to suppress free and fair 
competition in bidding for contracts, and by 
delusive and deceptive means members of 
the association are enabled to exact from 
owners a higher price for buildings than 
they would otherwise have to pay." 

VII 

It will have been noted that in the mod- 
ern cases the attempt has been to draw the 






CONTRACTS IN RESTRAINT OF TRADE 131 

line between what is unreasonable and what 
is reasonable. The time has certainly come 
in this discussion to bring forward instances 
of what the modern law will permit as rea- 
sonable to contrast with the cases of un- 
reasonable restraint which have been cited. 
It is desirable that men should be free to com- 
pete in business; it is desirable also that 
contracts relating to business should be en- 
forced. There is a conflict of policies here, 
and some compromise is the only way out. 
As in the case of most legal distinctions it is 
only a difference in degree that separates ar- 
rangements of the forbidden sort from agree- 
ments of the permitted kind. But perhaps 
it will make the discussion clearer to define 
by catch phrases the two extremes. What, 
then, is forbidden is unreasonable restraint — 
suppression of competition; while what is per- 
mitted is reasonable restriction — regulation 
of competition. Phrases these are — but they 
may serve to fix the limits of the inquiry. 

A plain illustration of the social advantage 
of the reasonable agreement, in ameliorating 
competition, is Stovall v. McCutcheon (54 
S. W. 969), where the court enforced an 
agreement among the merchants in a cer- 
tain village to close at 6:30 p. m. on certain 



132 THE CONTROL OF THE MARKET 

days at certain seasons. The opinion of Mr. 
Justice White was brief, but to the point: 
" While it is true that contracts in restraint 
of trade are to be carefully scrutinized, and 
looked upon with disfavor, all contracts in 
restraint of trade are not illegal. The re- 
straint here put is but partial, — very incon- 
siderable. It is but a few hours, at most, 
each day, and for three and one-half months, 
during the extremely hot weather. It has 
come within the observation of the members 
of this court that during this season (May 
15th to September) many merchants close 
about 6:30 or 7 p. m. This cannot be held 
an illegal restraint of trade." 

Upon the whole, the courts will go very 
far to support, as reasonable, commercial 
agreements which they believe to have been 
made in good faith, with no idea to control 
the market. An illustration of this tendency 
is the leading case of Collins v. Locke (L. 
R. 4 A. C. 674). The agreement there in 
question was made between four parties then 
engaged in carrying on the business of 
stevedores in the port of Melbourne for the 
purpose of preventing competition. The 
principal shipping firms were by the provi- 
sions of the agreement divided into four sets, 



CONTRACTS IN RESTRAINT OF TRADE 133 

one set being allotted to each party to the 
agreement, if he can get them; if not, an 
equivalent was to be given; other ships were 
to be taken in order of arrival, and no other 
party was to interfere. The House of Lords 
made a distinction between these two clauses 
of the agreement. The division of the work 
for the regular firms, if the arrangement 
was satisfactory to them, their Lordships 
held reasonable. " Each party might in turn 
derive benefit from this clause, and one of 
the four firms would always get the profit 
of the ship stevedored, though the work 
might be done by another of them. As re- 
gards the merchant, also, he can have his ship 
stevedored by the party whom he may re- 
quire to do it; at least there is no prohibition 
against his having it so done." But the 
positive restraint against working for the 
occasional ships except in rotation their 
Lordships held unreasonable. : ' Such a re- 
striction cannot be justified upon any of the 
grounds on which partial restraints of trade 
have been supported. It is entirely beyond 
anything the legitimate interests of the par- 
ties required, and is utterly unprofitable and 
unnecessary, at least for any purpose that 
can be avowed." 



134 THE CONTROL OF THE MARKET 

VIII 

This distinction between reasonable and 
unreasonable restraint of trade goes back 
to the leading case of Mitchell v. Reynolds 
(1 P. Wms. 181), where far too elaborate 
tests were given to determine whether an 
agreement should be considered legal or il- 
legal, the hopeless attempt being made to 
justify all of the previous decisions, ignoring 
the fact that the originally absolute rule had 
at length been modified so as to permit 
business dealings of certain sorts. The actual 
decision, however, was clearly sound; and it 
has been followed in almost countless cases 
of the same sort ever since. It was that a 
merchant in selling out his business could 
agree not to engage in a similar trade within 
a fair distance for a reasonable time. The 
policy to make the good-will which a trader has 
built up a salable asset overbore to that ex- 
tent the general policy against contracts in 
restraint of trade. It seems that such ar- 
rangements should not be permitted to stand 
when they are being used by a monopo- 
lizing concern to perpetuate its control of 
the market. There are conflicting authorities 
on this point, but the law probably is that 



CONTRACTS IN RESTRAINT OF TRADE 135 

such contracts are only permitted on grounds 
of public policy anyhow; and if they are 
being used as part of a scheme to monopolize, 
they should not be enforced. 

No scheme to control the market should 
be allowed to hide itself behind the doctrine 
of the reasonable character of an ancillary 
agreement, as it was attempted to do in 
Arnot v. Pittston and Elmira Coal Co. (68 
N. Y. 558). This was an arrangement be- 
tween Pennsylvania operators and New York 
dealers by which it was agreed that no coal 
should be sold in the Elmira market except 
under the provisions of the contract through 
the dealers, the operators undertaking that 
no other coal should come north of the state 
line during the continuance of the agreement. 
Later the parties fell out, but the court dis- 
missed them all, Mr. Justice Rapallo say- 
ing: "Every producer or vendor of coal or 
other commodity has the right to use all 
legitimate efforts to obtain the best price 
for the article in which he deals. But when 
he endeavors to artificially enhance prices 
by suppressing or keeping out of the market 
the product of others, and to accomplish that 
purpose by means of contracts binding them 
to withhold their supply, such arrangements 



136 THE CONTROL OF THE MARKET 

are even more mischievous than combinations 
not to sell under an agreed price. Combi- 
nations of that character have been held to be 
against public policy and illegal. If they 
should be sustained, the prices of articles of 
pure necessity, such as coal, flour, and other 
indispensable commodities, might be arti- 
ficially raised to a ruinous extent far exceed- 
ing any naturally resulting from the pro- 
portion between supply and demand." 

IX 

One of the most important applications of 
this distinction between what is reasonable 
and what is unreasonable remains for discus- 
sion — the " factor's agreement " so called. 
A common case is Clark v. Frank (17 Mo. 
App. 602), where Mr. Justice Thompson 
said, in passing: "We see no force in the 
argument that the agreement not to sell the 
goods at less than the trade price was void as 
being in restraint of trade, so far as it related 
to goods which might be purchased of other 
dealers. If it were void, that fact would not 
help the defendants, for the plaintiff merely 
chose to say that he would allow certain 
drawbacks upon the performance of a certain 
condition." 



CONTRACTS IN RESTRAINT OF TRADE 137 

Another instance of the factor's agreement 
of equal importance is Houck & Co. v. 
Wright (77 Miss. 476). The facts here 
also presented an ordinary business arrange- 
ment, whereby the manufacturers of a certain 
piano made an exclusive agency contract with 
a certain dealer. It was urged in the case 
cited that this arrangement, excluding as it 
did other persons from getting a right to sell 
this piano in this territory, tainted all the 
surrounding transactions with restraint of 
trade. But Mr. Justice Terral was clear 
that this was not at all so. " The arrange- 
ment between Vose & Sons and Houck & 
Co., is entirely legal. It does not operate to 
suppress competition, nor to regulate the 
production or sale of any commodity. As 
said by counsel of appellant, its purpose is 
to facilitate and advance the sale of pianos. 
It is Vose & Sons regulating their own busi- 
ness, endeavoring thereby to sell as many 
pianos as possible, and on the best terms for 
themselves and their customers." 



All of these cases show that, by a well- 
devised contract, power is often obtained to 
control even the modern market, wide as it 



138 THE CONTROL OF THE MARKET 

is. It is the recognition of this possibility 
that makes the law against the conspiracy to 
control the market so thoroughgoing. Any 
scheme to monopolize is therefore illegal, 
whatever may be its outward seeming. 
Even the exceptions which have been made 
to the sweeping policy against all restraint 
of trade cannot be claimed by those who have 
a scheme to monopolize on foot. In the case 
of the sale of a plant to a trust the conve- 
nants not to compete cannot be enforced. 
And in the case of a trust the factor's agree- 
ment should not be enforced. Upon this 
whole matter, however, the operation of the 
common law, as has been seen, is negative. 
It denies enforcement to all such arrange- 
ments; but it can do little if all within the 
combination are well satisfied. To be sure, 
it is the common fate of pools that when some 
of its members can resist the advanced price 
no longer they will sell out, knowing that 
their fellow members in the pool will be 
without legal redress. But some pools are so 
successful in getting big profits for all con- 
cerned, or their members are so loyal, that no 
one breaks away, and prices stay up. Then 
the public needs affirmative law for its pro- 
tection; and this is the explanation of these 



CONTRACTS IN RESTRAINT OF TRADE 139 

modern statutes, discussed in a later chapter, 
giving to the prosecuting officers power to 
initiate proceedings to compel the dissolution 
of such combinations. 



NOTE 

Other important cases in addition to those discussed 
in the text-book holding an unreasonable agreement unen- 
forceable are: Leighton v. Wales, 3 M. & W. 545 
(1838); Oliver v. Gilmore, 52 Fed. 562 (1892); Santa 
Clara Lumber Co. v. Hayes, 76 Cal. 387 (1888); Craft 
v. McConoughy, 79 I1L 346 (1875); Anderson v. Jett, 
89 Ky. 375 (1889); Cohen v. Envelope Co., 166 N. Y. 
292 (1901) ; Barataria Canning Co. v. Joulian, 80 Miss. 
555 (1902); Central Ohio Salt Co. v. Guthrie, 35 Oh. 
St. 666 (1880); Morris Run Coal Co. v. Barclay Coal 
Co., 68 Pa. St. 173 (1871) ; Fairbank v. Leary, 40 Wis. 
637 (1876). But see— Perkins v. Lyman, 9 Mass. 523 
(1813); Manchester & L. R. R. v. Concord R. R., 66 
N. H. 100 (1889). 

Other important cases not discussed in the text hold- 
ing a reasonable agreement enforceable are: Wickens 
v. Evans, 3 Y. & J. 318 (1829); Nordenfelt v. Maxim 
& Nordenfelt Co. (1894), A. C. 535; Bowling v. Taylor, 
40 Fed. 404 (1889); Grogan v. Chaffee, 156 Cal. 611 
(1909); Herriman v. Menzies, 115 Cal. 16 (1896); 
Willson v. Morse, 117 Iowa, 581 (1902); Central Shade 
Roller Co. v. Cushman, 143 Mass. 353 (1887); National 
Benefit Co. v. Union Hospital Co., 45 Minn. 272 
(1891); Houck & Co. v. Wright, 77 Miss. 476 (1899); 
Presbury v. Fisher, 18 Mo. 50 (1853); Bancroft v. 
Union Embossing Co., 72 N. H. 402 (1903); Diamond 
Match Co. v. Roeber, 106 N. Y. 473 (1887). But see- 
Lawrence v. Kidder, 10 Barb. 641 (1851); Lufkin Rule 
Co. v. Fringeli, 57 Oh. St. 596 (1898). 



141 



CHAPTER VII 

MODERN FORMS OF COMBINATIONS 



Notwithstanding all the law against 
agreements in restraint of trade which has 
just been recited, the present generation has 
seen in the rise of the trusts the greatest 
movement toward consolidation which is 
recorded in economic history. But this con- 
solidation was not accomplished without a 
reckoning with the law. In the face of this 
adverse law the ingenuity of attorneys, act- 
ing for clients who wished to bring about a 
community of interests, has been taxed to the 
utmost; and at best their schemes have proved 
only temporary expedients. In this era of 
consolidation there has been a change of base 
at least four times during this brief period: 
First, the pool — a direct agreement between 
the corporations concerned for their joint 
operation to a certain extent; second, the 
trust — an indirect arrangement between the 

142 



MODERN FORMS OF COMBINATIONS 143 

shareholders to control the action of their 
corporations; third, the holding corporation 
— a central company to hold the shares of the 
constituent companies; and fourth, the single 
corporation, which buys the properties of the 
combining corporations outright. Despite 
the many cases relating to these four typical 
forms of intercorporate relationship, the 
problem is still, to a large extent, unsolved 
as to how various corporations may be con- 
centrated under one control. 



II 

It is hardly fair to the legal profession to 
say that it entertained a real expectation for 
the success of any simple form of pooling 
arrangement during the last two decades. 
In the face of so much express authority 
against combinations in restraint of trade, 
clients must have been advised that to form 
pools was to run for luck. Perhaps every 
member would live up to his agreement; but 
there was no remedy at law if anyone did 
not. Perhaps the proceeds of the pooling 
would be fairly divided; but the court would 
not order an accounting. And experience 
showed again and again that, without legal 



144 THE CONTROL OF THE MARKET 

obligation, there were always members in any 
such pool treacherous enough to break with 
it. Moreover, there was the corporation 
law to reckon with, as well as the combina- 
tion law. It has always been held to be 
against the policy of the corporation law for 
corporations to surrender their independence 
by entering a pool. Although the conse- 
quences of this were not quite so dire as in 
the case of illegal combinations, still no 
corporation could be held to any agreement 
of this sort. 

The leading case on the general principle 
against the combination of corporations in a 
partnership or any other association is Whit- 
tenton Mills v. Upton (10 Gray 582). In 
that case the court — Thomas, J. — held that, 
as a matter of law, a corporation could, under 
no circumstances, beneficial to it or detri- 
mental to it, and for no purpose, legal or 
illegal, be a member of a partnership. " The 
effect of all our statutes, the settled policy 
of our Legislature, for the regulation of 
manufacturing corporations is that the cor- 
poration is to manage its affairs separately 
and exclusively, certain powers to be exer- 
cised by the stockholders, and others by offi- 
cers who are the servants of the corporation 



MODERN FORMS OF COMBINATIONS 145 

and act in its name and behalf. And the 
formation of a contract, or the entering into 
a relation, by which the corporation or the 
officers of its appointment should be divested 
of that power, or by which its franchise 
should be vested in a partner with equal 
power to direct and control its business, is 
entirely inconsistent with that policy." 

When, therefore, corporations sign agree- 
ments to carry on their business in common, 
the scheme is always held illegal. This is 
sufficiently shown by the case of Mallory v. 
Hanaur Oil Works (86 Tenn. 598). This 
was a " combination syndicate," arranged be- 
tween four corporations engaged in manu- 
facturing cottonseed oil at Memphis. The 
contracting mills agreed to select a commit- 
tee, composed of representatives from each 
corporation, and to turn over to this com- 
mittee the properties and machinery of each 
mill, to be managed and operated by this 
committee, through officers, agents, and em- 
ployees selected by them, for the common 
benefit, the profits and losses of such opera- 
tions to be shared in proportions agreed 
upon. In declaring this arrangement illegal 
Mr. Justice Lurton said: " The decided 
weight of authority is that a corporation has 



146 THE CONTROL OF THE MARKET 

not the power to enter a partnership, either 
with other corporations or with individuals. 
It is unnecessary to consider this contract as 
constituting a mere traffic arrangement; for 
the conclusion already announced that it was 
an effort to form a partnership, determines 
that in its scope and effect it sought to accom- 
plish much more than would be understood 
by the phrase traffic arrangement.'' 



in 

Emery v. Candle Company (47 Oh. St. 
320) is a typical form of pooling agreement. 
An association was shown in that case which 
included ninety-five per cent, of the manu- 
facturers of candles in the United States. 
The members of the association surrendered 
their freedom of action only to this extent, 
that they were required to pay into the 
treasury two and one-half cents per pound 
on every pound of candles disposed of on 
their own account. Whether they sold any 
candles or not, they received a share in the 
profits of the pool. This plan was thus self- 
acting; it was to the interest of each member 
to remain idle when the price was low, to 
operate only if the price were high. The 



MODERN FORMS OF COMBINATIONS 147 

expected result followed; the production of 
candles decreased, the price of candles in- 
creased during the whole existence of the 
association. The court pronounced the ar- 
rangement bad altogether: "We are of the 
opinion that the suit cannot be maintained, 
for the reason that the objects of the associa- 
tion were contrary to public policy and in 
no way to be aided by the courts. No re- 
covery can be had except by giving effect to 
the terms of the agreement. The action is 
in substance a suit against the association to 
recover a sum due the plaintiff under the 
terms on which the association was formed. 
Its suit is to recover its portion of the ill- 
gotten gains." 

The principal rule against restraint of 
trade thus remains practically unaffected by 
any further modifications than those which 
have been mentioned. Nester v. Continental 
Brewing Company (161 Pa. St. 473) is 
representative of the class of cases in ques- 
tion. The bill set forth that a Brewers' 
Association of Philadelphia had been formed 
under articles of agreement in writing by 
forty-five brewers of Philadelphia, individ- 
uals, firms, and corporations. By the prin- 
cipal section of the agreement each member 



148 THE CONTROL OF THE MARKET 

of the association agreed not to sell any beer 
to any new trade, or to any customer of any 
brewer that belonged to the association. A 
summary from the opinion of Mr. Justice 
Sterrett follows: " The test question in every 
case like the present is whether or not a 
contract in restraint of trade exists which is 
injurious to the public interests; if injurious, 
it is void as against public policy. Courts 
will not stop to inquire as to the degree of 
injury inflicted. It is enough to know that 
the natural tendency of such contracts is in- 
jurious. So if the natural tendency of such 
contracts is to injuriously affect public in- 
terests, the form and declared purpose are 
immaterial. Courts will not lend their aid 
in illegal transactions no matter how dis- 
guised." 

It is to be noted again that when a com- 
bination in restraint of trade is once proved 
to be such, outlawry is declared. It can 
bring no suit against those in it; neither can 
they sue it. The courts will have nothing 
to do with association or associates. This is 
the penalty, that the loss must lie where it 
falls; and this policy is, in itself, often one 
of the strongest of deterrents. Thus any 
member of the association may withdraw 



MODERN FORMS OF COMBINATIONS 149 

whenever it suits his interest to do so, a re- 
sult that minimizes the harm that such a 
combination may effect. For experience 
shows that the result is that competition still 
goes on surreptitiously, despite the agree- 
ment, since every active member is strength- 
ening his position in preparation for an ulti- 
mate withdrawal. And at the psychological 
moment some member, who has accumulated 
a large stock while production has been cur- 
tailed, will sell out at near to the top price 
and break the market, thus causing his asso- 
ciates irreparable losses. 



IV 

Such was the state of the law when the 
trust agreement was discovered by a startled 
community. The material features of that 
scheme are now well known ; the first great 
case on this scheme, People v. North River 
Sugar Refining Company (121 N. Y. 582), 
brought out the details of the whole matter. 
All the shares of the capital stock of all of 
the confederating corporations were trans- 
ferred to a board of trustees. These trustees 
issued trust certificates in lieu of these shares, 
thus reserving the voting rights in all of the 



150 THE CONTROL OF THE MARKET 

corporations. As a cover for the scheme all 
of the several corporations remained in exist- 
ence; and in form each conducted its own 
business without any cross agreements among 
themselves. In one of the most perfect opin- 
ions in our books Mr. Justice Finch held the 
trust agreement invalid. He concluded thus: 
" And here, I think, we gain a definite view 
of the injurious tendencies developed by its 
organization and operation, and of the public 
interests which are menaced by its action. 
As corporate grants are always assumed to 
have been made for the public benefit, any 
conduct which destroys their normal func- 
tions, and maims and cripples their separate 
activity, and takes away their free and in- 
dependent action, must so far disappoint the 
purpose of their creation as to affect un- 
favorably the public interest. It is not a 
sufficient answer to say that similar results 
may be lawfully accomplished by an in- 
dividual. And so we have reached our con- 
clusion, and it appears to us to have been 
established, that the defendant corporation 
has violated its charter and failed in the per- 
formance of its corporate duties, and that in 
respects so material and important as to jus- 
tify a judgment of dissolution. Having 



MODERN FORMS OF COMBINATIONS 151 

reached that result, it becomes needless to 
advance into the wider discussion over 
monopolies and competition and restraint of 
trade and the problems of political economy. 5 ' 
A few years later the suit to dissolve the 
first of all the trusts, the Standard Oil 
alliance, was decided in favor of the State. 
In State v. Standard Oil Company (49 Oh. 
St. 137) the Attorney-General of Ohio 
commenced this action to oust the defendant 
of the right to be a corporation on the ground 
that it has abused its corporate franchises by 
becoming party to an agreement that is 
against public policy. The agreement shown 
in the case provided that almost all the stock- 
holders in the defendant company had trans- 
ferred their stocks to certain trustees, as had 
nearly forty other corporations engaged in 
the same business in pursuance of the same 
scheme. All of the stockholders of all the 
companies involved received in return for 
their shares trust certificates issued by the 
trustees. The trustees thereupon elected 
themselves to be a majority of the directors 
of each of the constituent companies, and 
thereby controlled the conduct of each, and 
so of all. Minshall, who wrote the opinion, 
rested the decision upon broader grounds of 



152 THE CONTROL OF THE MARKET 

public policy than did Finch. " Much has been 
said in favor of the objects of the Standard 
Oil Trust, and what it has accomplished. It 
may be true that it has improved the quality 
and cheapened the costs of petroleum and its 
products to the consumer. But such is not 
one of the usual or general results of a monop- 
oly; and it is the policy of the law to regard, 
not what may, but what usually happens. 
Experience shows that it is not wise to trust 
human cupidity where it has the opportunity 
to aggrandize itself at the expense of others. 
The claim of having cheapened the price to 
the consumer, is the usual pretext on which 
monopolies of this kind are defended. It is 
no answer to say that this monopoly has in 
fact reduced the price. That policy may have 
been necessary to crush competition. The 
fact exists that it rests in the discretion of this 
company at any time to raise the price to an 
exorbitant degree. A society in which a few 
men are the employers and the great body 
are merely employees or servants, is not the 
most desirable in a republic; and it should 
be as much the policy of the laws to multiply 
the numbers engaged in independent pur- 
suits or in the profits of production, as to 
cheapen the price to the consumer. Such 



MODERN FORMS OF COMBINATIONS 153 

policy would tend to an equality of fortunes 
among its citizens, thought to be so desirable 
in a republic, and lessen the amount of pau- 
perism and crime. By the invariable laws of 
human nature, competition will be excluded 
and prices controlled in the interest of those 
connected with the combination or trust." 

From the point of view of those who had 
a scheme to monopolize on foot this trust 
device was excellent. It was centralized in 
its control and secret in its doings. It left 
the power of control with the inner circle, 
while enabling them to market as many se- 
curities as they pleased. But after these two 
decisions it was recognized that it must be 
abandoned. The case was now hopeless at 
law. It had been held against the law govern- 
ing corporations in that it was ultra vires for 
a company so to surrender its independence. 
It was also a void arrangement by the law 
against combinations in restraint of trade. 
The courts looked through the outer forms 
into the inner facts. All the cleverness that 
went to form the trust — and all the ingenuity 
with which it was defended — were lost upon 
the courts. The possibilities of injury to both 
public and private interests were too great 
for the scheme to receive any countenance 



154 THE CONTROL OF THE MARKET 

from the law. The plight of the minority 
stockholders was hopeless unless the law 
should declare the scheme bad; for the trust 
could close down a plant where there was a 
large and recalcitrant minority, which would 
not exchange its shares for trust certificates, 
until these stockholders were starved out. 
And from the point of view of the State the 
scheme was almost beyond control, as its 
accounts could be juggled, and responsibility 
for wrong-doing could not be fixed. 



A transition period of a few years followed 
upon the dissolution of the trusts. The orig- 
inal owners still had the properties; and the 
common danger held them together, tem- 
porarily at least. Meantime the lawyers were 
casting about for some new scheme for com- 
bining interests which would have legal sanc- 
tion. The stress of the situation demanded 
forms of reorganization which would bear the 
scrutiny of the courts. The first schemes 
were rather obvious attempts to make use of 
some established arrangement as a cover from 
combination. Rather absurd these were, 
doomed to early exposure from the outset. 



MODERN FORMS OF COMBINATIONS 155 

For the law making unenforceable contracts 
which tended to restrain trade could not thus 
be evaded. What could not be done directly, 
could not be brought about by any such in- 
direction. The law is not so easy to evade 
as laymen think, particularly when there is 
a public policy behind the law. 

One of the schemes which was tried out was 
the making of simultaneous exclusive con- 
tracts with a common central agent. In Cum- 
mings v. Union Bluestone Company (164 N. 
Y. 401), for example, the principal producers 
of this stone were combined in an association 
to regulate prices, while a separate company 
was made the exclusive sales agent of each 
participant. The New York court held this 
arrangement illegal altogether. Mr. Justice 
Landon said: "The plaintiff urges that it 
was a question of fact for the jury, and not 
of law for the court, whether the contract was 
simply to secure reasonable prices, or to ex- 
tort from the public unreasonable prices. It 
may be conceded that one of its purposes was 
to enable the parties to obtain reasonable 
prices, but it gave them the power to fix 
arbitrary and unreasonable prices. The scope 
of the contract and not the possible self- 
restraint of the parties to it, is the test of its 



156 THE CONTROL OF THE MARKET 

validity. They could raise prices to what they 
supposed the market would bear, and as they 
expected to supply nearly the entire demand 
of the market, the temptation to extortion 
was unusually great." 

Another scheme, more ingenious yet, was 
the " dead lease " seen in Clark v. Need- 
ham (125 Mich. 84). The arrangements 
made involved two leases, one from the 
party who was to sell out one branch 
of his business, absolute in form at a high 
rental to be paid by the buyer ; the other from 
the buyer back to the seller at nominal rental, 
with covenants against engaging in that line 
of business. The court was quick to see 
through this elaborate plan; Mr. Justice 
Grant said on that point: " The plain object 
of the agreement was to substantially close 
this part of plaintiffs' business, and to give 
defendants a monopoly of it. The parties 
evidently recognized the invalidity of such a 
contract, put in plain and unequivocal lan- 
guage, and sought to evade it by these two 
so-called leases. The arrangement was a 
bare subterfuge to evade the law. Such 
contracts tend to destroy competition and 
create monopolies, and are void." 

It became altogether a question of legality 



MODERN FORMS OF COMBINATIONS 157 

— which is a thing more desired by the 
captains of industries than one who reads the 
sensational magazines might suppose. It is 
true that without legal sanction much may 
be done under a gentlemen's agreement; but 
without legality in organization there is no 
security. What depends upon individual 
agreement is subjected to the chances of per- 
sonality. Nor can there be any permanence 
unless the arrangement is perpetual, with- 
out regard to the death of anyone. And 
what is of more importance, without security 
and permanence there can be no issue of 
securities, or market of them. 



VI 

Meanwhile the more eminent counsel 
who had the great interests to advise were 
engaged in larger plans, more feasible at 
law because devised with more insight. 
Their idea was to create a holding corpora- 
tion, a new central body which should ac- 
quire a majority of the stocks of the con- 
stituent companies. This scheme suited their 
clients well; indeed, it was doubtless the 
clients that decided upon its adoption. For 
the holding corporation possessed possibili- 



158 THE CONTROL OF THE MARKET 

ties for manipulation pleasant to contem- 
plate; the marketable issues could be doubled 
by making the stock of the holding corpo- 
ration twice that of the constituent com- 
panies; and as the operations of the business 
could be concealed between the accounts of 
the holding company and the constituent 
companies, there would be nothing to fear 
from the publication of formal statements. 
There were obviously legal difficulties. In 
most states by the common law it was beyond 
the powers of one corporation to hold the 
stock of another for the purpose of opera- 
tion, for the reasons advanced in the brief 
case which follows. Milbank v. New York, 
Lake Erie, and Western Railroad (64 How- 
Pr. 20) was an action brought by minority 
shareholders of the Buffalo, New York, and 
Erie Railroad to restrain the defendant rail- 
road from voting the stock which it had ac- 
quired to control the railroad in which the 
plaintiffs held their stock. Haight, the pre- 
siding judge, gave the relief asked, explaining 
the case thus: " In the case under considera- 
tion, the New York, Lake Erie, and West- 
ern Company have acquired by purchase the 
majority of all the stock issued by the 
Buffalo, New York, and Erie Railroad. If 



MODERN FORMS OF COMBINATIONS 159 

its officers are permitted to vote thereon, they 
can elect a board of directors of their own 
choosing. It would then be for the interests 
of the New York, Lake Erie, and Western 
Railroad Company to have the Buffalo, New 
York, and Erie Company managed and con- 
trolled in the interests of the former company. 
This would be liable to result in injury to 
these plaintiffs and their fellow stockholders, 
and if so they have a right to complain." 

Although this decision represented the com- 
mon law, the statute law in some states, and 
special charters in others, permitted corpora- 
tions to be organized to hold the stocks of 
other corporations. This, however, was at 
best only a solution of one of the difficulties; 
another remained. Granted that the cor- 
poration was enabled to act without violation 
of the corporation law, there was the com- 
bination law still to reckon with. Thus in 
People v. Chicago Gas Trust Company (130 
111. 268) a corporation organized with power 
to hold the stocks of gas companies bought at 
once a majority of all the stocks of the four 
principal gas companies operating in Chicago. 
But the court on quo warranto held this 
scheme to be an abuse of the powers granted 
in the charter, Mr. Justice Macgruder say- 



160 THE CONTROL OF THE MARKET 

ing: " The control of the four companies by 
the appellee — an outside and independent 
corporation — suppresses competition between 
them, and destroys their diversity of interest 
and all motive for competition. There is thus 
built up a virtual monopoly in the manu- 
facture and sale of gas. Whatever tends to 
prevent competition between those engaged 
in a public employment, or business impressed 
with a public character, is opposed to public 
policy and, therefore, unlawful. Whatever 
tends to create a monopoly is unlawful as 
being contrary to public policy." 



VII 

All this time it had been recognized that 
there was a safer way, if one chose to take it. 
The approved form among lawyers during the 
last few years for making a consolidation 
of interests is by the formation of a single 
gigantic corporation intended to take over, 
by purchase, all the different concerns that 
are to be brought together. Several courts 
have already dealt with the legality of this 
operation. In Trenton Potteries Company v. 
Oliphant (58 N. J. Eq. 507) a conveyance 
had been made by the owners of a pottery 



MODERN FORMS OF COMBINATIONS 161 

business to the Trenton Potteries Company, 
which carried with it covenants by the sellers 
not to compete against the business sold. As 
the good will was included in the transfer, 
these covenants would be good, if the whole 
transaction were unobjectionable. The diffi- 
culty was that the buying corporation had 
been formed for the express purpose of tak- 
ing over various competing plants, and that 
the object aimed at by the parties was to 
secure power to suppress competition and to 
control production. Upon this point Mr. 
Chief Justice Magie made these observa- 
tions: "Contracts by independent and un- 
connected manufacturers or traders looking 
to the control of the prices of their com- 
modities, either by limitation of production, 
or by restriction on distribution, or by ex- 
press agreement to maintain specified prices, 
are without doubt opposed to public policy. 
But appellant is a corporation and not 
an individual. Corporations, however, may 
lawfully do any acts within the corporate 
powers conferred on them by legislative grant. 
Under our liberal corporation laws, corporate 
authority may be acquired by aggregations of 
individuals, organized as prescribed to carry 
on almost every conceivable manufacture or 



162 THE CONTROL OF THE MARKET 

trade: such corporations are empowered to 
purchase, hold, and use property appropriate 
to their business. Under such powers it is 
obvious that a corporation may purchase the 
plant and business of competing individuals 
and concerns." 

This is not unquestioned law by any means. 
A case directly opposed is Distilling and 
Cattle Feeding Company v. People (156 111. 
448). This case arose after the reorganiza- 
tion of the Whisky Trust into an operating 
corporation. The regular forms had been 
gone through with, and the title to the prop- 
erties had been duly made over to the new cor- 
poration in exchange for the outstanding trust 
certificates. But the Illinois court could see in 
this change of form nothing that was substan- 
tial. As Mr. Justice Bailey said: " The trust 
and its operations are to be carried on in the 
same way, for the same purposes, and by the 
same agencies, as before. The trust, then, 
being repugnant to public policy and illegal, 
it is impossible to see why the same is not 
true of the corporation which succeeds to it 
and takes its place. The control exercised 
over the distillery business of the country — 
over production and prices — and the virtual 
monopoly formerly held by the trust, are 



MODERN FORMS OF COMBINATIONS 163 

in no degree changed or relaxed, but the 
methods and purposes of the trust are per- 
petuated and carried out with the same per- 
sistence and vigor as before the organization 
of the corporation. There is no magic in a 
corporate organization which can purge the 
trust scheme of its illegality, and it remains 
as essentially opposed to the principles of 
sound public policy as when the trust was in 
existence. It was illegal before and is illegal 
still, and for the same reasons." If this 
decision be good law, any great corporation 
can be dissolved by reason of its past history. 
But even if this can be done, would it not be 
better to settle the matter upon the basis of 
its present conduct? 

VIII 

From step to step in this succession there 
is a movement toward integration. Now that 
the end of that economic evolution has been 
reached in the single corporation, the law 
against combinations in restraint of trade may 
perhaps cease to operate. It has done a good 
work in forcing those who wish to bring to- 
gether various corporations into greater enter- 
prises to organize in an open manner under 
the general corporation laws. Now at last 



164 THE CONTROL OF THE MARKET 

the State may impose such special regulation 
upon these industrial concerns as the situation 
requires. The problem is therefore much 
simplified since the time of the trusts. It 
has been reduced to the lowest terms by this 
praiseworthy activity of the law in insisting 
that all combinations of every stripe should be 
destroyed. Now that we have the fruits of 
that first victory in the enforced form of the 
large corporation, we may hold a council 
of war during this armistice. Shall these 
great corporations be destroyed, or shall 
they be regulated? That, it is submitted, is 
the trust problem in its latest phase. All of 
the law for the destruction of combinations in 
restraint of trade is to a certain extent super- 
seded, because the new monopoly is no longer 
in the form of a combination. On the other 
hand, the law for the regulation of businesses 
affected with a public interest can now for 
the first time be effectively applied to the 
whole field of virtual monopoly. 



NOTE 

As the problems discussed in the text are by no means 
settled as yet, some leading cases as to each of the four 
principal types of industrial combination are subjoined. 

I. THE POOL HELD ILLEGAL 

United States v. Trans-Missouri Freight Assn., 166 
U. S. 290; Addystone Pipe Co. v. United States, 175 
U. S. 211 (1899) ; Getz v. Federal Salt Co., 147 Cal. 115 
(1905); Leonard v. Abner Drury Co., 25 D. C. App. 
Cas. 161 (1905); White Star Line v. Star Line, 141 
Mich. 604 (1905); Emery v. Ohio Candle Co., 47 Oh. 
St. 320 (1892); Nester v. Continental Brewing Co., 161 
Pa. St. 473 (1894); Coquard v. National Linseed Oil 
Co., 171 111. 480 (1898). 

II. THE TRUSTS HELD ILLEGAL 

American Preserves Trust v. Taylor Mfg. Co., 46 
Fed. 152 (1891); Georgia Trust Co. v. State, 109 Ga. 
736 (1899) ; State v. American Cotton Oil Trust, 40 La. 
Ann. 8 (1888); Southeastern Securities Co. v. State, 91 
[Miss. 195 (1907); State v. Nebraska Distilling Co., 29 
Neb. 700 (1890) ; People v. North River Sugar Ptefining 
Co., 121 N. Y. 582 (1890); State v. Standard Oil Co., 
49 Oh. St. 137 (1892). 

III. HOLDING CORPORATIONS HELD ILLEGAL 

Northern Securities Co. v. United States, 193 U. S. 
197 (1904); Standard Oil Co. v. United States, U. S. 

165 



166 NOTE 

(1911); Dunbar v. American Telephone Co., 224 111. 
9 (1905); MacGinniss v. Boston & M. Copper Co., 29 
Mont. 428 (1904); State v. Oil Co., 217 Mo. 1 (1909); 
State v. Virginia Carolina Chemical Co., 71 S. C. 544 
(1904). 

IV. AS TO THE ILLEGALITY OF THE SINGLE CORPORATION 

The following cases seem to hold that it is illegal: 
Distilling Co. v. People, 156 111. 448 (1895); Attorney- 
General v. Booth, 143 Mich. 89 (1906); National Lead 
Co. v. Grote Paint Store Co., 80 Mo. App. 247 (1899). 
But the following cases hold it to be legal: Central 
Shade Roller Co. v. Cushman, 143 Mass. 353 (1887); 
Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507 
(1899); Clancey v. Onondaga Salt Co., 62 Barb. 395 
(1862) ; Oakdale Mfg. Co. v. Garst, 18 R. I. 484 (1896). 



CHAPTER VIII 

BUSINESSES AFFECTED WITH A PUBLIC 
INTEREST 



The modern trust will, therefore, soon 
take the form of the single corporation, 
dominating its market. Such corporations, 
however large, will apparently stand before 
the law as other corporations. There can be 
no great expectation (even if it were thought 
desirable) that these great aggregations of 
capital can be destroyed as illegal in point of 
organization. But the great corporation with 
substantial control of its market differs 
fundamentally from the small one which is 
simply a factor in competition. Our law 
from time immemorial has subjected those 
who had monopoly, whoever they might be, 
to an extraordinary system of regulation, as 
compared with the virtual freedom accorded 
to those who had no control of their market. 
That great corporations are to play a great 
part in the industries of this country for an 

167 



168 THE CONTROL OF THE MARKET 

indefinite future, anyone who has observed 
the course of economic evolution during the 
past generation must see. And now that they 
have arrived at substantial dominance over 
their respective markets, they should be regu- 
lated, as established monopolies have always 
been regulated. This regulation by law has 
always been the policy of the State in dealing 
with any business which has so far attained 
control of its market as to be affected with 
a public interest. Indeed, such businesses 
have been spoken of from time immemorial 
as public employments; and such public serv- 
ices have always been subject to a special law 
compelling their proprietors to deal fairly with 
their public. 

ii 

The mediaeval system involved almost uni- 
versal regulation of all the doings of men, 
and therefore its commercial policy was almost 
completely restrictive. The ideal held was a 
society in which all things were ordered, the 
full conception being that every man had a 
right to his place in this established order. 
This state of affairs was by most men greatly 
desired. Indeed, a regulated monopoly with 
the corresponding obligation of public service 



PUBLIC BUSINESSES 169 

seemed in that age, to the great majority of 
people, far better than an unregulated com- 
petition without public obligation. It was 
thought that things were put in a true bal- 
ance by requiring each person to perform 
his part, and allowing no person to interfere 
with the employment of another. And all 
of this control of industrial affairs was felt 
to be ultimately for the benefit of the whole 
public, who could obtain thereby, without 
favor, at reasonable prices proper service in 
accordance with their requirements. Thus 
the baker and the miller were by the mediaeval 
law bound to serve all that applied, or else 
they were answerable for it in the courts. 
Likewise the surgeon and the smith were 
bound to serve all with due diligence; and so 
were the barber and the tailor. Innkeepers, 
carriers, ferrymen, and wharfingers were held 
to be at the service of the public then as now. 

The common law persists from age to age, 
and though the instance of its rules may be 
seen to change as old conditions pass away 
and new conditions arise, its fundamental 
principles remain. The early cases which have 
just been cited are illustrations of this course 
of events. Barber, surgeon, smith, and tailor 
are no longer in common calling because the 



170 THE CONTROL OF THE MARKET 

situation in the modern times does not require 
it; but innkeeper, carrier, ferryman, and 
wharfinger are still in that classification since 
even in modern business the conditions require 
them to be so treated. With changed eco- 
nomic conditions in modern times, new call- 
ings have come into being with such poten- 
tialities that this special law has been utilized 
as never before in regulating them. Indeed, 
from the point of view of one who believes in 
our common law, the class of public callings 
is capable of indefinite extension whenever 
new conditions bring new employments within 
its scope. In all times our law has held to the 
principle that this peculiar regulation was 
necessary in certain kinds of business. And 
it depends largely upon the opinion current 
at the time how far this law shall be 
extended. 

The principle of law which permits the 
regulation of these callings has never been 
abandoned, though the conditions calling for 
its application at various times have greatly 
changed. Whenever the public is subjected 
to a monopoly, the power of oppression in- 
herent in a monopoly is restricted by law. 
Whenever, on the other hand, competition 
becomes free, both in law and in fact, the 






PUBLIC BUSINESSES 171 

need of governmental regulation ceases ; public 
opinion ceases to demand such regulation, 
and the law withdraws it. At the beginning 
of the nineteenth century was the extreme 
swing of the pendulum. In this fortunate 
time, when in most businesses the field seemed 
free to all, the belief was that the ordinary 
processes of competition would produce with 
sufficient certainty adequate service at fair 
prices. But an absolutely free competition 
is practically an impossible economic condi- 
tion; and to this men later awoke when, with 
the growth in the power of the proprietors of 
the industries, the people still demanded pro- 
tection from the State in many ways. 

As the prevalence of competitive conditions 
in business limits the application of the prin- 
ciples of public service law, so the prevalence 
of monopolistic conditions extends their ap- 
plication. Such a change came about in 
the latter part of the nineteenth century. 
About a generation ago a change in com- 
mercial practice showed with remarkable dis- 
tinctness the advantage of combination. 
Great enterprises took the place of small 
ones, and great enterprises required co- 
operation and combination. As the people 
became accustomed to look upon combination 



172 THE CONTROL OF THE MARKET 

as the price of success, they came more and 
more to regard it as a blessing rather than 
an evil; and public opinion has gradually 
turned away from the individualistic ideal 
until to-day it has been fairly discarded by 
the current philosophy. With the principle 
of combination as the spring of action has 
come a corresponding need of controlling the 
action of such combinations for the good of 
the whole public. As the rights of the in- 
dividual trader yield to the rights of the 
great corporation, so in the view of the man 
of the present day, the rights of the cor- 
poration should in their turn yield to the 
rights of the whole people. 



in 

The case for State control is plainest in those 
few utilities where there are natural limita- 
tions upon the sources of supply which are 
essential to the business. This situation in 
itself gives some degree of monopoly to those 
who control the sources of supply most 
accessible to their market, in that it prevents 
effective competition with the local service. 
Thus those who control the most advan- 
tageous waterpower have a natural monopoly; 



PUBLIC BUSINESSES 173 

and so it seems that they must deal fairly 
with all to the extent of their undertaking. 
For the same reason those who have pre- 
empted the natural gas fields must deal with- 
out discrimination with the public which they 
have assumed to serve therefrom. It would 
be going too far doubtless, at the present 
time, to claim that it is accepted law that 
natural limitation of a public necessity neces- 
sarily makes its general sale public employ- 
ment. So long as those who have virtual 
monopoly of the anthracite coal fields are 
left free to charge what prices they please, 
the principle is in abeyance. And so long 
as those who have virtual control of the 
petroleum oil wells are left free to discrimi- 
nate as they please between their customers, 
the duty is not recognized. But it may be 
that in the fullness of time these now all too 
powerful purveyors to public needs will be 
brought within this law, and subjected to 
public regulation. 

One of the earliest needs of a community 
is a supply of water for domestic uses; and 
it has been always obvious that this is a 
public utility in a true sense of that term. 
Said Mr. Justice Lord, in an important Ore- 
gon case (21 Ore. 211) : " How can the de- 



174 THE CONTROL OF THE MARKET 

fendant, upon the tender of the proper com- 
pensation, refuse to supply water without 
distinction to one and all whose property- 
abuts upon the street in which its pipes are 
laid? If the supplying of a city or town 
with water is not a public purpose, it is 
difficult to conceive of any enterprise in- 
trusted to a private corporation that could 
be classed under that head." 

An equally plain public service is the 
irrigation system, so obvious indeed that the 
propriety of State aid to such an undertaking 
has never been doubted. In Cummings v. 
Hyatt (54 Neb. 35). Chief Justice Harri- 
son held a taking for irrigation to be a pub- 
lic use: " It must be concluded that it has 
been established by both legislative and 
judicial determination that the use, in con- 
templation of law and designated thereby, 
was a public one, and with the further con- 
siderations that all members of the public 
within the range of the operations of the 
work might demand and command service 
by the company by payment of the usual and 
customary rates for such service, and that 
the company was of such a nature as would 
subject it in its transactions to legislative 
control, — it was not improperly classed as an 



PUBLIC BUSINESSES 175 

internal improvement and entitled to the 
rights and privileges of such a work." 



IV 

Another natural limitation results from 
the character of the product. If the physical 
characteristics of the product are such that 
it can only have a local distribution, the 
barrier against outside competition may 
fairly be said to be natural. What, after 
all, is that element in the situation which 
makes the sale of gas a public employment, 
while the vending of candles is a private 
business? Is it not this — that the box of 
candles may be sent from any factory into 
any market, a condition which preserves vir- 
tual competition in every market, while a 
thousand cubic feet of gas can only be got 
from the pipes of the local company, which 
gives it control of the situation? The sit- 
uation is substantially the same as to the 
distribution of electricity as compared with 
the sale of coal. Electricity can practically 
only be supplied from the local wires, even 
though transmission over considerable dis- 
tances is now practicable. It cannot be 
transported independently and stored for 



176 THE CONTROL OF THE MARKET 

long periods as coal may be. When the 
market is thus limited by the nature of the 
product, it may fairly be said that the mo- 
nopoly of the local company is natural. 

It is interesting to note that in the first 
cases which arose as to the supply of gas, 
the courts held that the proprietors of a 
gas works were as free as the owners of any 
factory to sell gas to some and refuse to 
supply others. But it was soon seen that 
the business was one which could not be left 
without control. It is universal law now that 
a gas company must serve all who apply. 
One of the earlier instances of this rule in 
the United States is to be found in Shepard 
V. Milwaukee Gas Light Company (6 Wis. 
539). The plaintiff complained of the re- 
fusal by the established gas works to supply 
him. The defendant claimed that under the 
circumstances of the case it was not bound 
to serve the plaintiff. Mr. Justice Smith 
held that the gas company was bound to 
sell its gas to every citizen of Milwaukee 
upon compliance with such regulations only 
as the company might rightfully impose. 
His argument was this: " It is sufficient for 
the purposes of this case to know that the 
company had the exclusive right to manu- 



PUBLIC BUSINESSES 177 

facture and sell gas, and that hence the only 
means of supply available to citizens was 
through the agency of the company. Cor- 
porations of this kind are not like trading 
or manufacturing corporations whose produc- 
tions may be transported from market to 
market throughout the world. Its manu- 
facture depends upon the consumption of 
the immediate neighborhood for its profit 
and success, and upon no other place. From 
the nature of the article, the objects of the 
company, their relations to the community, 
and from all the considerations before men- 
tioned, it is to me apparent that the com- 
pany is not at all analogous to an ordinary 
manufacturing or trading corporation." 

It is most significant that no electric light 
company has ever squarely denied that there 
rested upon it the primary obligation to serve 
all. It shows that the law of public service 
has now such general acceptation that in 
a new instance where it is obvious it will 
be applied by the courts without hesitation. 
In holding for the consumer in an Illinois 
case (196 111. 626), Mr. Justice Carter thus 
stated the fundamental propositions involved: 
" There is no statute regulating the manner 
under which electric light companies shall 



178 THE CONTROL OF THE MARKET 

do business in this state. They are therefore 
subject only to the common law, and such 
regulations as may be imposed by the mu- 
nicipality which grants them privileges. Ap- 
pellee, being organized to do a business af- 
fected with a public interest, must treat all 
customers fairly and without unjust discrimi- 
nation. Both reason and authority deny to 
a corporation clothed with such rights and 
powers, and bearing such a relation to the 
public, the power to arbitrarily fix the price 
at which it will furnish light to those who 
desire to use it." 



Another obvious restriction upon effective 
competition results from limitation of time. 
When the need of the applicant is immediate, 
the person from whom he asks service has the 
upper hand. This monopoly may only be 
temporary; but it is none the less real. This 
insistent need for present service largely ex- 
plains why the innkeeper dealing with the 
wayfarer, and the hackman bargaining with 
the traveler, have always been held subject 
to special law governing their dealings. 
The weary wayfarer would pay an exorbitant 
price rather than be turned back into the 



PUBLIC BUSINESSES 179 

night, even although another inn were 
nearby; and it is notorious that a hackman 
can extort an outrageous fare from a passen- 
ger in haste, although another hackman may 
be around the corner. It is the instant need 
also which gives to those agencies established 
for the rapid transmission of intelligence 
that virtual monopoly which the telegraph 
and telephone obviously have. There are 
other ways of sending communications by 
mail or by messenger, but they are not 
effective substitutes. 

In the case of the telephone it is shown 
plainly that there is a common law principle 
applicable to all businesses which are monopo- 
listic in character. From the first the courts 
held the business subject to the public serv- 
ice law. Said a Nebraska judge in a leading 
case (17 Neb. 126) : " While there is no law 
giving it a monopoly of the business in the 
territory covered by its wires, yet it must 
be apparent to all that the mere fact of this 
territory being covered by the plant of the 
respondent, from the very nature and char- 
acter of the business, gives it a monopoly of 
the business which it transacts. No two 
companies will try to cover this same terri- 
tory. The demands of the commerce of the 



180 THE CONTROL OF THE MARKET 

present day make the telephone a necessity. 
All the people, upon complying with the 
reasonable rules and demands of the owners 
of the commodity, — patented as it is, — should 
have the benefit of this new commerce. The 
wires of the respondent pass the office of the 
relator. The relator never can be supplied 
with this new element of commerce, so neces- 
sary in the prosecution of all kinds of busi- 
ness, unless supplied by the respondent." 

A fundamental case that comes to mind 
at this point is the Illinois case (184 111. 438) 
putting the Associated Press in public em- 
ployment, where Mr. Justice Phillips said: 
" The Associated Press, from the time of its 
organization and establishment in business, 
sold its news reports to various newspapers 
who became members, and the publication 
of that news became of vast importance to 
the public, so that public interest is at- 
tached to the dissemination of that news. 
The manner in which that corporation has 
used its franchise has charged its business 
with a public interest. It has devoted its 
property to a public use, and has, in effect, 
granted to the public such an interest in its 
use that it must submit to be controlled by 
the public for the common good, to the extent 



PUBLIC BUSINESSES 181 

of the interest it has thus created in the 
public in its private property." 



VI 

The sites upon which certain services can 
be conducted to best advantage are few in 
number. The necessity of these locations 
to proper conduct of the business may be 
so great that those who are possessed of these 
sites may well be said to enjoy a natural 
monopoly, since if others venture to establish 
themselves at all at such disadvantage, their 
competition will be comparatively ineffectual. 
At all events those in the favorable locations 
could exact higher prices than would be 
fair, were it not for the fact that the law 
intervened. Of course the importance of 
the site depends upon the character of the 
business. Terminal facilities operated in 
connection with railway systems furnish the 
most striking examples of this importance of 
particular sites. To a lesser extent this is 
true of those services which although not 
dependent upon an exact location are oper- 
ated with peculiar advantage in particular 
areas, such as warehouses in business dis- 
tricts and cold storage in market-places. 



182 THE CONTROL OF THE MARKET 

The grain elevator furnishes the principal 
case upon the subject of the legal regulation 
of established monopoly. Any discussion of 
the foundations of our industrial relations 
must give chief place to the case of Munn v. 
Illinois (94 U. S. 113). Upon the right un- 
derstanding of this case depends the true 
conception of our general theory of the 
function of State regulation. It was in that 
case that Mr. Justice Waite announced the 
doctrine of State control over public busi- 
nesses in language which has been quoted 
so often as to be familiar to all: " This brings 
us to inquire as to the principles upon which 
this power of regulation rests, in order that 
we may determine what is within and what 
without its operative effect. Looking, then, 
to the common law, from whence came the 
right which the constitution protects, we find 
that when private property is ' affected with 
a public interest, it ceases to be juris privati 
only.' Property does become clothed with 
a public interest when used in a manner to 
make it of public consequence, and affect the 
community at large. When, therefore, one 
devotes his property to a use in which the 
public has an interest, he, in effect, grants 
to the public an interest in that use, and 



PUBLIC BUSINESSES 183 

must submit to be controlled by the public 
for the common good to the extent of the 
interest he has thus created." 

Any business which must be conducted 
within a certain location is thus public in 
character by reason of this limitation. In 
the case of the stockj^ards, for example, its 
monopoly is largely due to position, as Chief 
Justice Johnson pointed out in a Kansas 
case (74 Kans. 1): "Because of the nature 
of the business and the railroad facilities, the 
establishment of other markets at or near 
Wichita is impracticable, and hence these 
stockyards are, and of necessity will be, the 
only available place where the breeders, 
feeders, and dealers of a great scope of 
country can conveniently market their live 
stock. The company has, therefore, a prac- 
tical monopoly of a vast business affecting 
thousands of people who are almost obliged 
to deal at that market and at the rates which 
the company may choose to charge." 



VII 

Whether the monopolistic conditions found 
in a given business are permanent or tem- 
porary, is the essential question. Where the 



184 THE CONTROL OF THE MARKET 

monopoly is natural, it is a case for regula- 
tion by law. Where the monopoly is tem- 
porary, its destruction should be hastened 
by the law. If this programme is to be 
adopted the lawyers must be trained to dis- 
tinguish between conditions establishing that 
permanent condition of monopoly, which 
makes State control the better course, and 
the adventitious corner, where condign pun- 
ishment of the members of the pool is called 
for. Other circumstances than natural limi- 
tation in its strictest sense inevitably produce 
monopoly. Economic forces of various sorts 
may, either singly or in combination with 
others, naturally result in monopoly. Such, 
for instance, would be the case in a business 
where production upon a large scale progress- 
ively decreased cost. In such a business it 
is inevitable that the business will be concen- 
trated in the hands of a few concerns. Such 
seems to be the case in a high ratio in the 
petroleum business and in gas supply. 

Another usual characteristic of a virtual 
monopoly is the relatively large cost of the 
plant. In very many instances this runs 
high into millions which must be invested 
before the service can be begun. This neces- 
sity of getting together so much capital limits 



PUBLIC BUSINESSES 185 

fundamentally the amount of such construc- 
tion. Canals and railroads furnish the chief 
examples of this. It would take perhaps 
twenty billion dollars to duplicate the present 
facilities for transportation; and it is, there- 
fore, practically inconceivable that it will 
be done. Moreover, in most monopolies there 
is still another reason why capital is kept 
from investment in a competing service. 
The capital invested must be sunk at the 
risk of failure in this one market. For ex- 
ample, an investment made in a foundry or 
an electric plant cannot be changed. Thus 
to the enormous cost as a deterrent to com- 
petition is added the imminent risk of total 
loss in a desperate competition in which one 
competitor must perish. 

Still another characteristic of virtual mo- 
nopoly is that the applicant who wishes an 
individual service of the kind rendered by 
the established company is almost always at 
great disadvantage relatively in supplying 
himself. It is, of course, rare that the pos- 
sibilities in any given case will be so re- 
stricted that if the applicant is refused service 
by the particular company no alternative is 
open to him; usually, in some way or other, 
he could hit upon some way out in such a 



186 THE CONTROL OF THE MARKET 

case. But the alternative offered will often 
be an inadequate substitute, disadvantageous 
to a greater or lesser degree. In such a sit- 
uation there is no effectual competition to 
regulate the action of the original company, 
and without the interposition of the law 
there might be great oppression. A farmer, 
charged an exorbitant price for a harvester, 
may keep to his scythe, but only at great 
disadvantage. The mere fact that there are 
two gas companies in a town is not enough 
to alter the fact that the situation is essen- 
tially monopolistic, for if one may refuse 
service, the other may also. 

The common fact in all the instances of 
public employment which have been dis- 
cussed is virtual monopoly. It matters not 
by what conditions this situation is estab- 
lished. The conditions which may produce 
virtual monopoly are various; and some of 
them will suffice alone. The effect of various 
natural limitations, such as available sources 
of supply, restricted opportunities of access, 
limited time at disposal, and difficulties in 
distribution have just been discussed. But 
of almost equal importance are other factors 
producing true economic monopoly by de- 
terring effectual competition, such as the 



PUBLIC BUSINESSES 187 

cost of the plant, the large scale upon which 
the business is done, the absence of effectual 
substitutes, and the dependent position of 
the particular service. With all the factors 
which may produce virtual monopoly in mind 
it will be evident enough that in this general 
situation, however established, there is real 
danger to society calling for regulation by 
the State. 

VIII 

A review of all of the instances of public 
employment which have thus far been cited 
in the course of this whole discussion will 
show that this conception of virtual monopoly 
will cover everything. Nothing narrower will 
do, as for example the difference sometimes 
put forward between the undertaking of a 
public service in contradistinction to the fur- 
nishing of a public supply. Now, it is true 
that most of the cases are cases of service — 
the railway and the warehouse, for example; 
but other of the cases are of supply, — the 
waterworks and gas works, for instance. 
Indeed, there is nothing in this distinction, 
either in economics or in law. It is sub- 
mitted that any business is made out to be 
public in character where there is a virtual 



188 THE CONTROL OP THE MARKET 

monopoly inherent in the nature of things. 
If virtual monopoly is made out as the 
permanent condition of affairs in a given 
business, then the law, it seems, will consider 
that calling public in its nature. On the 
other hand, if effective competition is proved 
as the regular course of things in a given in- 
dustry, the law will hold all businesses within 
it as private in their character. Under our 
constitutional system a distinction is made 
upon this line. In the public calling, regu- 
lation of service, facilities, prices and dis- 
criminations is possible to any extent. 
Monopolistic conditions demand such policy; 
and at no period in history has this been 
more apparent than now. In the private 
callings no such legislation should be per- 
mitted. Where competitive conditions pre- 
vail there should be freedom ; and at no epoch 
in our industries has it been more important 
to insist upon this. But wherever there is 
established monopoly in a business of public 
importance at any time and from any cause, 
the law is requisite that all shall be served 
on a reasonable basis. 



NOTE 

A few of the now numerous cases are subjoined where 
public employment has been found after elaborate dis- 
cussion of the situation: Waterworks — Haugen v. Al- 
bina Water Co., 21 Ore. 411 (1891); Irrigation System — 
Slosser v. Salt River Canal Co., 7 Ariz. 376 (1901); 
Natural Gas — State v. Consumers Gas Co., 157 Ind. 345 
(1901); Waterpowers — Sammons v. Keirney Power Co., 
77 Neb. 580 (1906); Stockyards— Wichita Stockyards 
Co. v. Ratcliff, 74 Kas. 1 (1906); Gas Worhs— Opinion 
of the Justices, 150 Mass. 592 (1890) ; Electric Plants — 
Snell v. Clinton Electric Co., 196 111. 626 (1902); 
Electric Power — Jones v. No. Georgia Electric Co., 125 
Ga. 618; Telegraph— Green v. Telegraph Co., 136 N. C. 
489 (1904); Telephone — State v. Nebraska Telephone 
Co., 17 Neb. 126 (1885); Railroads— Raleigh R. R. v. 
Davis, 2 Dev. & Bat. 451 (1837); Pipe Lines— West 
Virginia Co. v. Volcanic Co., 5 W. Va. 382 (1872) 
Saw Mills— State v. Edwards, 86 Me. 102 (1893) 
Grist Mills— Gaylord v. District, 204 111. 576 (1903) 
Docks — Barrington v. Commercial Dock Co., 15 Wash. 
170; Grain Elevator — Munn v. Illinois, 94 U. S. 113. 

In the following cases among others, the business in 
question was held private: Skating Rink — Tombler 
v. Koelling, 60 Ark. 62 (1894); Th eaters— Percell v. 
Daley, 19 Abb. N. C. 301 (1886); Foundry— Loan 
Assn. v. Topeka, 20 Wal. 655 (1874); Mill— Allen v. 
Jay, 60 Me. 124 (1872); Coal Yard— Opinion of the 
Justices, 182 Mass. 605 (1882); Apartment House — 
Davis v. Gay, 141 Mass. 531 (1886). 



189 



CHAPTER IX 

UNFAIR PRACTICES IN PUBLIC CALLINGS 



Although from the earliest times some 
restraint has been exercised over such lines 
of activity as are of vital interest to the 
public, in recent times there undoubtedly is 
an increasing need of stricter regulation of 
those important employments which are 
affected with a public interest. Indeed, in 
the case of the public services, their power 
over all commercial activities has become so 
apparent that the necessity for the control 
of that power for the protection of the whole 
people is generally conceded. Undoubtedly 
it is now thoroughly understood by all who 
conduct businesses which are affected with 
a public interest, that they must not un- 
justifiably refuse applications for service, 
willfully neglect to provide adequate facilities, 
unreasonably demand unusual prices, or 
capriciously discriminate between their pa- 
trons. Nevertheless it is occasionally as- 

190 






UNFAIRNESS IN PUBLIC CALLINGS 191 

serted by the managers of a public employ- 
ment that they may refuse to give service 
when it becomes necessary to protect their 
business interests; and more frequently the 
right is claimed to make differences in their 
prices in order to promote their business in- 
terests. 

ii 

To meet the exigencies of the trust situation 
at present, positive law is required. Abusing 
the freedom which those in private business 
enjoy, those who have had control of the 
industrial trusts have adopted various poli- 
cies to force other competitors out of busi- 
ness, which would never have been allowed 
had the law of public business been applied 
to the situation. One of the most repre- 
hensible methods of building up monopoly 
has been by adopting an exclusive policy, 
refusing to sell to dealers who handled the 
goods of their competitors. This almost in- 
evitably forces a smaller competitor to the 
wall. It is true that such competition is not 
held unfair where individuals only are con- 
cerned. But concerted action of this sort, 
as has been seen, is generally considered to 
be an actionable conspiracy. In open com- 



192 THE CONTROL OF THE MARKET 

petition this business policy may be per- 
mitted; but when monopoly is present, it 
becomes too oppressive to be borne. From 
a business standpoint it may be an effective 
policy at times to refuse to have any deal- 
ings with a customer who persists in patron- 
izing a rival. The employment of such 
policies is forbidden those who conduct pub- 
lic services largely because in public busi- 
nesses virtual monopoly is usually present. 

In any case of public employment, how- 
ever, it is really impossible to justify in any 
way the outright refusal to serve an appli- 
cant, who wishes service, on the ground that 
he is dealing with a rival. One example 
of this is Chicago & Alton Railroad v. 
Suffern (129 111. 274), where the court 
held that a railroad could not refuse to 
receive coal from a shipper who had begun 
to make shipments by another route, basing 
its decision upon the ground that serious in- 
jury would result to the business interests of 
the people if shippers could be compelled 
by such arbitrary measures to patronize one 
railroad to the exclusion of others. As the 
court said, since fair competition between 
roads is for the public interest, if a road could 
do so it could establish the most odious sort 






UNFAIRNESS IN PUBLIC CALLINGS 193 

of monopoly. Another leading case is Ben- 
nett v. Dutton (10 N. H. 481). There one 
stage line refused to take passengers coming 
for a part of the way by a rival line; but the 
court held this to be a plain violation of 
public duty. 

ill 

It has been pointed out that the power of 
the trusts to crush efficient competitors is 
dependent to a large extent upon various 
kinds of discrimination. It will be profitable 
to see how the courts have dealt with this 
sort of thing in the case of the public call- 
ings in general, since the establishment of 
any business as public in its nature depends 
in the last analysis upon the existence of 
virtual monopoly. Indeed, the modern rule 
requiring service to all who apply, without 
discrimination against any, is founded upon 
the absolute necessity of preventing those 
who have control of the market from exer- 
cising that power to the disruption of the 
industrial order. 

The promptness with which the courts act 
in recent years to prevent personal discrimi- 
nation in the case of an admitted public em- 
ployment is shown in a decision like Menacho 



194 THE CONTROL OF THE MARKET 

V. Ward (27 Fed. 529), where Mr. Justice 
Wallace said of a discriminating rate against 
those who shipped goods by another line: 
" Its tendency is to deprive the public of 
their legitimate opportunities to obtain car- 
riage upon the best terms they can. If 
it is tolerated it will result practically in 
giving the defendants a monopoly of the 
carrying trade between these places. Mani- 
festly it is enforced by the defendants in 
order to discourage all others from attempt- 
ing to serve the public as carriers between 
those places. Such discrimination is not only 
unreasonable, but is odious." 

There is a telephone case in South Carolina 
(61 S. C. 83) where one telephone com- 
pany made its patrons agree not to use the 
rival system. One of its patrons violated 
this agreement; but the court held that his 
service could not be cut off. " A telephone 
company," said the court, " would have no 
more right to refuse service for this cause, 
than a railway company would have to refuse 
to transport the goods of a shipper, unless 
he would agree to patronize its lines ex- 
clusively, and not to give any of his business 
to any competing railway line." The neces- 
sity of compelling those in public employ- 



UNFAIRNESS IN PUBLIC CALLINGS 195 

merit to serve without discrimination is thus 
apparent; it is no less obvious in every case 
of virtual monopoly. 

It seems to be an almost conclusive argu- 
ment for treating as public-service companies 
all great corporations that have established 
control of their market, that by no other 
law than that of public calling can the sit- 
uation be met. In private calling factors' 
agreements of this sort are supported, which 
show r s that the present conditions in the con- 
duct of these great businesses have out- 
grown this law. In public callings every 
restrictive condition is void; and this points 
to this law as the way out. In private busi- 
ness this sort of competition is properly held 
fair; in public business it is properly held 
unfair. It is the modern desire to protect 
the small manufacturers from such competi- 
tion by the large manufacturers. There can 
be no doubt about this to anyone at all in- 
formed of present public opinion upon this 
crucial question. 



rv 

Another policy, which is often of such 
obvious advantage as to be common in ordi^ 



196 THE CONTROL OF THE MARKET 

nary business, is to make lower proportionate 
rates to larger than to smaller customers, 
and even occasionally to decline to deal with 
very small customers, who may be more 
trouble than they are worth. The latter is a 
small matter, perhaps, while the former is a 
matter of great moment to the managers of 
public services, who may often see the op- 
portunity to get large amounts of valuable 
business, highly profitable in the aggregate, 
even at lower proportionate rates, if they can 
still maintain higher proportionate rates upon 
the regular business which they get from 
smaller customers who are not in a position 
to dictate their terms. It should be obvious 
that in a public employment all applicants 
must be served at fair rates, even if in a par- 
ticular case it is especially bothersome or even 
particularly expensive. 

It is common knowledge that, in the con- 
ducting of many large public services, dis- 
counts have been made to large customers in 
order to get their trade and to retain it; and 
although this practice is not often made public 
at the present time, still it is the policy some- 
times adopted and, when attacked, openly 
defended. That this policy may be often 
advantageous in public, as it is in private 



UNFAIRNESS IN PUBLIC CALLINGS 197 

business, may be admitted. But it has already 
been seen that public duties may conflict with 
business policies; and that such a policy does 
conflict with public business may be argued 
from its deplorable results. The undue favor- 
ing of large customers will give them such 
commercial advantages that they will crush 
out their smaller competitors; and this is 
particularly true when a railroad company 
adopts the policy of making lower propor- 
tionate rates to large customers as such. 

Such discrimination is opposed to a sound 
public policy. It would build and foster 
monopolies, add largely to the accumulated 
power of capital and money, and drive out 
all enterprise not backed by overshadowing 
wealth. This was the line of argument relied 
upon by the court in the leading case of Hays 
v. Pennsylvania Railroad (12 Fed. 309), 
where the rather plausible scheme was 
adopted of a sliding scale by which the 
amount of rebate was graduated by the 
quantity of freight furnished by each ship- 
per, a scheme which the railroad urged was 
adopted in good faith for the purpose of 
stimulating production and increasing its 
tonnage. But the court said that if the rate 
was fixed by the business furnished the rail- 



198 THE CONTROL OF THE MARKET 

way, " the small operator must sooner or 
later be forced to abandon the unequal con- 
test and surrender to his more opulent 
rival." 

Although this case now represents the 
great weight of authority, it must be admit- 
ted that there is still a respectable minority 
which holds that lower relative rates may be 
made to large customers despite the injury 
which small customers must suffer thereby. 
In the case of Silkman v. Water Commis- 
sioners (152 N. Y. 327), for example, it was 
held that lower water rates might be given 
to large consumers than to small consumers, 
the court saying that to make such differ- 
ence was a " business principle of general ap- 
plication." The courts which take this view 
profess to limit their doctrine by the quali- 
fication that the differences between the 
rates for large and small customers must 
not to be unreasonable, but it is difficult to see 
any standard by which that difference may 
be tested if it is once permitted; and indeed 
it may be asserted with confidence that it is 
opposed to fundamental principles whenever 
the services to large customers and to small 
customers are practically identical, as they 
usually are. 



UNFAIRNESS IN PUBLIC CALLINGS 199 



In pursuance of the same policy of in- 
creasing the total profits by reaching out 
for additional business, which may be ob- 
tained by making concessions from the ordi- 
nary rates charged regular customers, many 
managers of public services claim the right 
to make special concessions for special kinds 
of business, in which the ordinary prices 
could not be afforded. The same argument 
is made here which is made elsewhere, that 
handling this additional business will nor- 
mally tend to the benefit of regular cus- 
tomers, since the additional business, if 
rightly managed in their interest, will relieve 
the regular business of a share of the fixed 
charges. This is the argument the apologists 
for the trusts make in justifying a lower 
price for export, which is making the Ameri- 
can people so restive. 

If public companies may not refuse to 
deal with persons who want services for one 
purpose, while they profess to serve others 
who want the same services for another pur- 
pose, it would seem to follow that, in their 
dealings with their patrons who ask the same 
service, a public company ought to charge 



200 THE CONTROL OF THE MARKET 

all alike, without regard to the need they 
have of the service. It is true that the re- 
sults are not so deplorable when the dis- 
crimination is between patrons who put the 
service to different usage as they are when 
the discrimination is between applicants 
who are competitors; but it is submitted 
that from a logical point of view there is 
substantially the same illegality, and from a 
practical point of view there is much the 
same injustice. Nevertheless it is strongly 
urged by the railroad companies, for ex- 
ample, that they should be allowed to make 
different rates for commodities which are 
destined for different purposes. It is, again, 
pointed out that this policy may be necessary 
in order to get more traffic, and that this by 
the law of increasing returns may be for 
the benefit of all concerned. 

Moreover, the railroad managers some- 
times make here an argument, which they 
elaborate in other situations, that upon 
grounds of public policy they should be per- 
mitted to make such lower rates as they did 
in Hoover v. Pennsylvania Railroad (156 
Pa. St. 220), where they exacted one rate 
for coal to be sold at retail for domestic con- 
sumption and a lower rate for coal to be 



UNFAIRNESS IN PUBLIC CALLINGS 201 

used for manufacturing purposes. And, in- 
deed, in that case the court was persuaded 
that there was a public policy to support 
such concessions for special purposes, in view 
of the encouragement given to productive 
industries by such preferential rates. But 
despite the economic argument, the legal 
principle remains that to charge different 
customers who wish the same service dif- 
ferent prices, when there is no difference in 
the conditions under which the service is ren- 
dered, is plain inequality, and therefore out- 
right discrimination. 

Singularly enough, this was the basis of 
the decision in another Pennsylvania case, 
Bailey v. Fayette Gas-Fuel Company (193 
Pa. St. 175), which was decided only a few 
years later. In that case a higher price per 
cubic foot was charged to customers who 
used gas simply for illuminating than was 
charged to such customers as used gas also 
for fuel. This was properly held to con- 
stitute unjustifiable discrimination, and so 
sweeping was the language of the court as to 
cover the less obvious case of making different 
prices for illuminating gas and fuel gas. 
But it would seem that the discrimination 
was unjustifiable, since it was not claimed 



202 THE CONTROL OF THE MARKET 

that there is any difference in the cost of 
the product to the company, the expense of 
supplying it at the point of delivery, or its 
value to the company in the increase of 
business or other ways. 



VI 

The law of public calling is thus a solu- 
tion for the worst wrong in the present sit- 
uation — discrimination. It is also the way 
out for the only other element in the situa- 
tion that is of first importance — extortion. 
In private business one may demand any 
price one can get. Not so in public business ; 
there only a reasonable price can be exacted. 
That there is danger of unreasonable prices 
in the present situation is quite evident. 
Control of the market leads to power to put 
up price; and power inevitably leads to 
action. No law can effectively deal with 
monopoly without the right to restrict to 
reasonable prices; the law governing the 
public services has that right. The elemental 
principles thus far noted in the public serv- 
ice law may be summarized as, on the one 
hand, the right of the company to derive a 
fair income, based upon the fair value of 



UNFAIRNESS IN PUBLIC CALLINGS 20S 

the property at the time it is being used 
for the public, taking into account the cost 
of maintenance or depreciation, and current 
operating expenses; and, on the other hand, 
the right of the public to have no more ex- 
acted than the services in themselves are 
worth. But the public service law has ad- 
vanced beyond these generalizations, until it 
has now become a working code. 

It will be generally agreed that the law of 
public calling is dealing with much success 
with this difficult problem of the determina- 
tion of the reasonable rate. The scientific 
nature of the subject is now beginning to be 
apprehended. Elaborate rules are being 
framed; for at last the rights of both sides 
are appreciated. On the one hand the full 
right of the public to restrict a public serv- 
ice company to reasonable charges is recog- 
nized; on the other hand the corresponding 
right of the public service company to a fair 
return upon its capital is admitted. The case 
of Brymer v. Butler Water Company (179 
Pa. St. 231) shows how a late decision deals 
with this troublesome conflict of interests. 
A schedule of rates fixed by a water com- 
pany came up for examination under a 
statute which gave the court the power to 



204 THE CONTROL OF THE MARKET 

revise a water schedule; and the court thus 
stated the general principles upon which it 
would proceed in judging the rates the com- 
pany was charging: " By what rule is the 
court to determine what is reasonable and 
what is oppressive? Ordinarily that is a 
reasonable charge or system of charges which 
results in a fair return upon the investment. 
Fixed charges and the costs of maintenance 
and operation must first be provided for, then 
the interests of the owners of the property 
are to be considered. They are entitled to 
a rate of return, if their property will earn 
it, not less than the legal rate of interest; 
and a system of charges that yields no more 
income than is fairly required to maintain the 
plant, pay fixed charges and operating ex- 
penses, provide a suitable sinking fund for 
the payment of debts, and pay a fair profit 
to the owners of the property, cannot be 
said to be unreasonable." 

The law of public employment is certainly 
ready to deal effectively with a most danger- 
our phase of the trust problem. It is com- 
mon knowledge that in most cases the capital- 
ization of an industrial trust is many times 
the actual amounts ever invested in the enter- 
prises consolidated; and, indeed, the depre- 



UNFAIRNESS IN PUBLIC CALLINGS 205 

ciated quotations show that they are capital- 
ized at many times their present value. This 
sort of thing would not confuse the Supreme 
Court of the United States in the determina- 
tion of the propriety of rates. Smyth V. 
Ames (169 U. S. 466) makes that point clear. 
In that important case Mr. Justice Harlan 
said in part: "If a railroad corporation has 
bonded its property for an amount that may 
not impose upon the public the burden of 
such increased rates as may be required for 
the purpose of realizing profits upon such 
excessive valuation or fictitious capitalization; 
and the apparent value of the property and 
franchises used by the corporation, as rep- 
resented by its stocks, bonds, and obliga- 
tions, is not alone to be considered when de- 
termining the rates that may be reasonably 
charged. We hold, however, that the basis 
of all calculations as to the reasonableness 
of rates to be charged by a corporation main- 
taining a highway under legislative sanction 
must be the fair value of the property being 
used by it for the convenience of the public." 
Plainly there is no safe basis for the de- 
termination of the rate except the actual 
values. It may be urged that the result of 
this rule will be to give to the public the 



206 THE CONTROL OF THE MARKET 

advantage of operation under monopolistic 
conditions, in particular the elimination of 
the wastes of competition. The reply is that 
this is precisely the method that should be 
pursued in dealing with the trust problem. 
If the state permits monopoly it may demand 
in return that the monopolist serve at a 
reasonable price. This has always been the 
law of public callings when the statement 
of it is made with discrimination. It will 
not do for the United States Steel Corpora- 
tion to demonstrate that its outstanding 
issues represent no more than the proper 
capitalization of its proved earning capacity. 
This argument is too obviously circular, since 
it very probably would not have this earning 
power, were it not for its virtual monopoly. 
It is not an answer for the Standard Oil 
Company to point to the fact that upon 
the whole it has not advanced the price of 
kerosene above the price at which it would 
have been fixed from time to time had com- 
petitive conditions prevailed during the whole 
period. It is still open to the general public 
to point to the forty-eight per cent, dividends 
in the last years, to say that these are the 
proofs of the contention that, notwithstand- 
ing, the price of kerosene has been too high 



UNFAIRNESS IN PUBLIC CALLINGS 207 

during the whole period. Under the public 
service law, therefore, the State could scruti- 
nize the issue of securities by the trusts, and 
limit the size of their dividends. 



VII 

It should now be apparent that the funda- 
mental question under discussion is how far 
public duty must necessarily deprive those who 
conduct public employments from basing their 
business policies upon the elementary principle 
of the law of increasing returns. That the net 
returns tend to increase with the volume of 
business in the industrial enterprises under 
consideration is obvious; and the question is 
whether a public service is to be permitted 
without hindrance to shape all things so as 
to hold its present business, and to add to it. 
Some managers of public services assert this 
boldly, and a few say frankly, for example, 
that they base their rates upon what the 
traffic will bear, making high charges against 
business from which high rates can be got, 
conceding low rates in order to get business 
which could not otherwise be obtained. Of 
course this consideration has some place in 
every philosophy of price-making, but it is 



208 THE CONTROL OF THE MARKET 

submitted that it is a dangerous principle, 
which may often operate to the disadvantage 
of the public where the public interest is 
involved. 

The real truth of the matter seems to be 
that, while in private business nothing need 
be considered except the law of decreasing 
cost, in public business there is the law 
against discrimination to be reckoned with. 
As the court said in the case of Tift v. 
Southern Railway (138 Fed. 753) it is no 
excuse for raising the rate upon a particular 
article, as lumber, that it will bear the 
advance; the question is rather what price 
it is fair lumber should pay in comparison 
with other commodities. It must be ad- 
mitted, however, that the view of many 
economists, that it will be to the advantage 
of all concerned if railroad managers are 
permitted to adopt any schedule of rates 
which will produce the most tonnage, because 
that policy will by the law of decreasing 
costs tend with an enlightened management 
to the lowering of all rates, is occasionally 
adopted by lawyers, and, indeed, has never 
been stated more strongly than recently, in 
the case of Interstate Commerce Commission 
V. The Chicago Great Western Railway 



UNFAIRNESS IN PUBLIC CALLINGS 209 

(141 Fed. 1003). But if railway managers 
are left practically unrestrained by law, it 
is sufficiently plain that they will maintain a 
high schedule of rates between localities 
where they have control of the situation and 
for valuable goods which will bear high rates, 
while at the same time making disproportion- 
ate concessions from this standard to get busi- 
ness at competitive points or to induce the 
movement of low grade commodities. 

The authorities upon these questions are 
a seething mass, particularly in the case of 
railroad rates. The various commissions 
which are near to actual conditions seem to 
show a tendency to condemn the fixing of the 
differing rates between localities and the 
differential rates between commodities solely 
by economic principles of demand and sup- 
ply, the unequal and unjust results of which 
the courts are apparently too far removed 
from the vital facts to realize or appreciate. 
But even in the courts a reaction seems to 
to be at hand: in the Naval Stores case (118 
Fed. 613) the court seemed to be much 
shocked, at least, by the disproportion be- 
tween the locality rates there disclosed; and 
in the Window Shade case (64 Fed. 72) the 
court considered the proportion to be ob- 



210 THE CONTROL OF THE MARKET 

served between the rate established on raw 
material and the rate on the finished product. 
It is not enough to say that this power to 
make preferential rates may be used for the 
benefit of a railway's territory as a whole 
or the industries of the whole country, the 
fact remains that it is a power which may be 
abused. So long as this power is left in the 
hands of the managers of these great 
companies without power of review by any 
authority upon any fundamental principle, 
it is in the hands of the railroad officials to 
build up an artificial market where the nat- 
ural conditions are adverse, or to turn an 
industrious city into a wilderness again; and, 
without restrictions by law, it is within their 
power to protect certain lines of industry 
and to crush out others. It is believed that 
these are too great powers to intrust to 
private hands without governmental control 
based upon some recognized standards. 

All that has been said in this section as 
to railway rates applies without much modi- 
fication to trust prices. It has been a com- 
mon policy with a national trust to lower 
prices temporarily in particular districts 
within which competition has appeared. 
There has been practically no limit to which 



UNFAIRNESS IN PUBLIC CALLINGS 211 

price would not be cut in this competitive 
district to accomplish the ruin of a com- 
petitor. And often the campaign would be 
supported by raising the price in the country 
at large. Such local discrimination would be 
held illegal by the law now developing 
against disproportionate charging. Even at 
the present time that law has developed 
enough to declare illegal serving at a loss 
in one locality, while demanding a com- 
pensatory price in another. If the law of 
public employment were applied to the trusts, 
therefore, most of the tactics pursued in their 
predatory campaigns would be held to be al- 
together illegal. For against discrimination, 
whether personal or local, the law is now set. 



VIII 

There is a clash of interests here; and 
there has been an inclination on the part 
of those who conduct these monopolistic 
businesses to contest every issue. This is 
hardly an enlightened selfishness ; for it seems 
to many who appreciate the temper of the 
public, that the time has come when exten- 
sion of the law and enforcement of it should 
be the avowed attitude of all conservative 



212 THE CONTROL OF THE MARKET 

persons who wish the perpetuation of the 
present condition of individual enterprise. 
This memorable year has seen the beginning 
of a great compromise between the public 
and the monopolies. The Attorney General 
of the United States has called for the regu- 
lation of the trusts by laws similar to those 
now in force against the carriers; and the 
chairman of one of the greatest combinations 
has openly declared that the trusts are ready 
to accept legislation going even to that ex- 
tent. Regulation, it is agreed, is the neces- 
sary concomitant of monopolization. Those 
who conduct a business affected with a public 
interest, it is admitted, may not adopt to the 
prejudice of the public the business policies 
which will get them the most. The law, 
it is conceded, must see to it that the power 
of the monopolist over the market is not 
abused. And the industrial wrongs of the 
last generation, it is recognized, must not 
be repeated. 



NOTE 

The following cases of illegal discrimination will bring 
the policy out more clearly: Wight v. United States, 
167 U. S. 512 (1886); Wester Union Telegraph Co. v. 
Call Publishing Co., 181 U. S. 92 (1901); Mobile v. 
Binville Water Co., 130 Ala. 379 (1901); Snell v. Clin- 
ton Electric Co., 196 111. 626 (1902); Louisville & E. 
St. Ry. Co. v. Wilson, 132 Ind. 517 (1892); Messenger 
v. Pennsylvania Ry. Co., 17 Vroom. 407 (1874); Griffin 
v. Goldsboro Water Co., 122 N. C. 206 (1898); Scofield 
v. Lake Shore Ry., 43 Oh. St. 571 (1885); Lorraine v. 
Pittsburg J. E. & E. R. R. Co., 205 Pa. St. 132 (1903) ; 
Fitzgerald v. Grand Trunk Ry. Co., 63 Vt. 169 (1891). 

For the distinction by which differences based upon 
cost are held justifiable see, among other cases, Wight v. 
United States, 167 U. S. 512 (1886); Savitz v. Ohio & 
M. Ry. Co., 150 111. 208 (1894); Root v. Long Island 
R. R. Co., 114 N. Y. 330 (1889); State v. Cincinnati, 
N. O. & T. P. R. R. Co., 47 Oh. St. 130 (1890). 



213 



CHAPTER X 

ENFORCEMENT OF THE ANTI-TRUST STATUTE 



It has been seen in the earlier chapters 
of this book what was the common law 
for the regulation of combinations in re- 
straint of interstate commerce in recent 
times. That law was adequate enough on 
the substantive side, — in its definition of what 
was legal and what was illegal; but it was 
too weak on the remedial side, — in that 
the existing processes had shown themselves 
wholly ineffectual to deal with the new con- 
ditions. It had been apparent for some time 
that there had arisen in very many of those 
important industries which purvey the neces- 
sities of life, great leaders who, with those 
whom they had associated with them, were 
with startling success taking advantage of 
those economic forces which had long been 
making for greater concentration. It was 
just before 1880 that these captains won in 
their respective industries the battles which 

214 



THE ANTI-TRUST STATUTE 215 

had assured their power. And long before 
1890 these new conditions became generally 
understood by reason of the many abuses of 
which those who had gained this great power 
were guilty. The country finally awoke to 
the fact that these captains of these indus- 
tries were doing about as they pleased. It 
was at this critical time that the allied in- 
terests insolently challenged the public by 
the open announcement of the industrial 
trusts, which have given their name to the 
whole problem, although these original 
trusts have long since been dissolved. 



ii 

To the most superficial observers of cur- 
rent events it thus became evident that the 
very existence of the competitive system 
was threatened by the industrial reorganiza- 
tion which was being worked out so suddenly. 
In a great fear that, if this movement should 
be allowed to gather more momentum, the 
very foundations of industrial society might 
be shaken, there was a widespread appeal 
from all classes for remedial legislation, upon 
the justifiable ground of the demonstrated 
inadequacy of the common law to grapple 



216 THE CONTROL OF THE MARKET 

with the chief offenders. As generally hap- 
pens under our Federal system, legislation 
began in the states before the Federal 
statute was enacted; and as has usually been 
the outcome, the Federal legislation is more 
thoroughgoing than in some states, but less 
extreme than in others. It cannot be denied 
that in some respects this anti-trust legisla- 
tion was absolutely necessary, for unless 
effective processes had been promptly pro- 
vided, there would have been no way to deal 
with those commercial brigands who were 
making further plans for predatory raids 
upon a helpless population. It has been the 
fashion of late years to sneer at the anti- 
trust legislation as the unintelligent attempt 
of a visionary people who confidently under- 
took the hopeless task of putting an imme- 
diate end to an irresistible evolution by legis- 
lative fiat. But in view of the existing condi- 
tions it was obvious enough that immediate 
provision was necessary for the effective 
prosecution of such extreme cases as should 
seem to the administration to demand action, 
so that the situation might not get beyond 
all control. 

This Federal anti-trust law of 1890— the 
so-called Sherman Act — begins by sum- 



THE ANTI-TRUST STATUTE 221 

ing to give to the anti-trust statute the ex- 
pected application. 

IV 

Strange often are the events by which 
progress is made. The Sherman Act had 
thus within a few years apparently been con- 
signed to a subsequent career of innocuous 
desuetude by the trust lawyers when an in- 
dustrial crisis suddenly arose in which the 
aid of the eminent lawyers of this higher 
coterie was given to the Government side. 
This railroad strike of 1894 soon threatened 
a social upheaval. And as conditions grew 
worse it was felt that only by an appeal to 
the Federal Government was its course to be 
stayed. It was under the Federal law that 
its leaders were seized and its forces finally 
disorganized. In these Federal proceedings 
the point was made prominent that unions 
were combinations plainly designed to re- 
strain commerce between the States, by in- 
terfering with the movement of inter- 
state trains. For contempt of an in- 
junction based largely upon the Federal 
anti-trust statute Debs (158 U. S. 564) 
went to his spectacular imprisonment. But 
these proceedings were not confirmed with- 



222 THE CONTROL OF THE MARKET 

out great argument in support of the juris- 
diction of the Federal Government; and in 
accepting these arguments the courts went 
far towards holding that any combination 
whose action really affected interstate com- 
merce was within the Sherman Act. 

We are used to this doctrine now, par- 
ticularly since the case of the boycott against 
the Danbury hatters (208 U. S. 274) ; but 
at the time it seemed the irony of fate that 
the anti-trust law should thus far be found 
without effect against combinations of capital, 
but directly applicable to combinations of 
labor. There have been other instances where 
the anti-trust laws have been employed against 
combinations of labor; and there will be more 
now that it is appreciated that the thing most 
abhorrent to the statute is monopolization. 
For nothing can be more clearly monopoliza- 
tion than the unionizing policies of many of 
the present unions. To exclude others from 
a market is the very definition of monopoliza- 
tion; and the unions are more frank in avow- 
ing this to be their object than the trusts are. 
The managers of the trusts make much talk 
of the savings of large scale production as the 
basis of their profits, to conceal the fact that 
much of this profit is the direct result of their 



THE ANTI-TRUST STATUTE 223 

monopoly. The labor leaders say frankly 
that they must have monopoly in order to get 
better wages; they seldom argue with con- 
viction that union labor is more economical. 



The railroad pools were the first commer- 
cial combinations to feel the force of the act; 
railroads, indeed, were indisputably engaged 
in interstate commerce. The Trans-Missouri 
Freight Association (166 U. S. 290) was the 
first to be attacked. This was a railroad pool 
of the typical sort, providing for a distribu- 
tion of traffic and a division of its freights 
upon a pro rata basis. Any arrangement of 
this kind plainly does away with real com- 
petition; and as such combinations have al- 
ways been regarded as illegal at common law, 
it was plainly right to hold this pool a com- 
bination in restraint of trade within the words 
of the statute. Still the railway bar, arrayed 
now in behalf of its own patrons, made a 
desperate attack upon the application of the 
statute. But the Supreme Court, now be- 
come more sophisticated, held that, as the 
direct effect of this combination was to con- 
trol competition in transportation between the 



2M THE CONTROL OF THE MARKET 

states, its continuance constituted a plain 
restraint of interstate commerce. A little 
later the case of the Joint Passenger Traffic 
Association (171 U. S. 505) came on for 
disposition. The draftsmen of that agreement 
had seen to it that the pooling did not go so 
far as formerly, and indeed, out of abundant 
caution, had put in a clause that nothing 
therein should be construed as in violation of 
the anti-trust law. But, as the substance 
of competition was really touched by the 
agreement, the Supreme Court said that this 
pool, too, should be dissolved for its direct 
restraint of interstate commerce. 

In the opinions in these cases the court 
went much further than was necessary in con- 
struing the statute to apply to all arrange- 
ments in restraint of trade, whether reason- 
able or unreasonable. Unnecessary as it 
was to the decision, Justice Peckham said in 
the first case: " By the simple use of the term 
contract in restraint of trade, all con- 
tracts of that nature, whether valid at 
common law or otherwise, would be included, 
and not alone that kind of contract which 
was invalid or unenforceable as being un- 
reasonable restraint of trade." Before this 
dictum was overruled it was destined to cause 



THE ANTI-TRUST STATUTE 225 

the public unnecessary alarm and the court 
itself much trouble. 

VI 

At this stage some people may have thought 
that all the future had in store had been dis- 
closed. It might have been said that proceed- 
ings against the industrial trusts would con- 
tinue to fail, as all the cases against them 
had already failed, because the Supreme 
Court would be satisfied with nothing less 
than the direct restraint of interstate com- 
merce, which could be found in its pure form 
only in the very conduct of interstate trans- 
portation. But closer readers of these deci- 
sions would have seen that the current of 
opinion in the court had now set in a new 
direction. 

At all events this new appreciation by the 
Supreme Court of the real scope of the 
Sherman Act was soon made manifest to all 
in the decision against the Addystone Pipe 
Company (175 U. S. 211) and the other foun- 
dries associated with it. This combination in- 
cluded the principal makers of iron pipe in 
large sizes between the Appalachian Moun- 
tains and the Rocky Mountains. By the 
rules of the association, no sales could be 



226 THE CONTROL OF THE MARKET 

made by any member of the association until 
he had bought the right to do so from the 
association. These rights were sold over the 
table at secret auctions, regularly conducted. 
Did Omaha advertise for more pipe for its 
waterworks; Omaha was put up at auction. 
The concern that thus bought the right to 
sell to Omaha could then charge Omaha any 
price it pleased. Indeed, other members on 
request were bound to put in bids higher still. 
It is needless to say that this pool was a 
combination in restraint of trade by any test. 
In view of what had previously been de- 
cided, the important question still remained 
whether the Supreme Court would hold this 
to be restraint of interstate commerce. But 
the doctrine which was now laid down by 
the Supreme Court in the Addystone case 
was that, as real suppression of previous com- 
petition in actual selling across state lines 
was shown, these facts made out a sufficient 
restraint of interstate commerce. And the 
Addystone case thus marks a great advance 
in Government's offense, especially as, in the 
course of the final decision, Mr. Justice Peck- 
ham said: "Total restraint of trade in the 
commodity is not necessary in order to render 
the combination one in restraint of trade." 



THE ANTI-TRUST STATUTE 227 

Since this decision there has been no 
doubt that whenever those who are engaged 
in interstate commerce by making a com- 
bination substantially put an end to their 
competitive dealings, this constitutes such re- 
straint of interstate commerce as to be within 
the Federal jurisdiction. In the Swift case 
(196 U. S. 375) this was made plain beyond 
all doubt. To be sure, the decision of 
this case might seem to a layman to be 
made easier by the fact that Swift & Com- 
pany and its alleged confederates admitted 
by their demurrer all of the sinister acts 
attributed to them. But granted that these 
Chicago packers had an arrangement among 
themselves not to bid against each other in 
the regular sales at the stock-yards, the 
question of Federal jurisdiction still re- 
mained. And the Supreme Court held that 
it does not matter that the combination acted 
within a single state, if that action really 
suppressed previous competition in inter- 
state trade. Mr. Justice Holmes well 
brought out the essential point in restraint 
of trade when he said: "The scheme as a 
whole seems to us within the reach of the 
law. It is suggested that the several acts 
charged are lawful, and that intent can make 



228 THE CONTROL OF THE MARKET 

no difference. But they are bound together 
as parts of a single plan. The plan may 
make the parts unlawful." 

It makes no practical difference whether 
you say baldly that the Knight case has 
really been overruled by the Addystone case, 
because the court has acquired a new point of 
view, or whether you say that it is the 
prosecuting officers who have learned, as 
this case of Swift & Company has abundantly 
showed, how to present their case so as to 
bring an industrial combination within the 
Trans-Missouri case. The real truth is that 
all concerned have been greatly influenced 
by the indignant opinion of an outraged 
public, for ordinary laymen could not but 
feel that the anti-trust statute was inexpli- 
cably nullified if it could reach various of- 
fenders, but never the trusts themselves. 



VII 

The law against the earlier forms of com- 
bination without central incorporation, there- 
fore, can be considered settled. JSut the great 
problem remains whether these newer forms 
which have central incorporation should be 
held legal. Such a combination was destined 



THE ANTI-TRUST STATUTE 229 

soon to be tested by the organization in 
1901 of the Northern Securities Company of 
New Jersey to take over the majority of the 
stocks of the Northern Pacific and the Great 
Northern after the bitter campaign of that 
year in the stock market. This is no place 
to retell the story of that bloody campaign 
for the control of the borderland between the 
Hill territory and the Harriman territory 
which terminated in this treaty of peace. 
The outcome is too recent history to require 
restatement. In the Northern Securities 
case (193 U. S. 197) the Supreme Court 
ordered that the New Jersey holding cor- 
poration should divest itself of its holdings 
of these stocks of these railways, as the 
holding was in violation of the Sherman 
Act. And in the Harriman case (197 U. S. 
244) the Supreme Court ordered that the 
Northern Pacific shares should be distributed 
pro rata to the stockholders in the Northern 
Securities Company, thus giving the final 
victory to the Hill allies. 

The decision in the Northern Securities 
case was a peculiar one. Four of the justices 
thought the holding scheme wholly bad; four 
thought it no violation of the Sherman Act. 
Mr. Justice Brewer held the balance of 



230 THE CONTROL OF THE MARKET 

power, taking the position that the arrange- 
ment was bad as involving total suppression 
of competition, but saying clearly that, if 
the scheme had been a reasonable one, it 
would not have been within the prohibition of 
the act. Thus the Northern Securities case 
was the handwriting upon the wall. All who 
could have read its message must have seen 
that the Federal Government was now given 
full power under the Sherman Act to deal 
with any combination unreasonably restrict- 
ing interstate commerce. After the Northern 
Securities case it must have been plain what 
the outcome was to be as to any form of 
combination designed to suppress competi- 
tion. The Addystone case had shown that 
the Sherman law applied to the case of an 
industrial combination engaged in inter- 
state commerce as much as it did to a 
railroad pool, such as was held illegal in the 
Trans-Missouri case. The Northern Securi- 
ties, having settled the matter for interstate 
traffic, was consequently a direct precedent 
for condemning such a holding scheme as 
the combination by which the Standard Oil 
concern restrained interstate trade. Although 
there are many laymen and lawyers who 
have inveighed against the Northern Se- 



THE ANTI-TRUST STATUTE 231 

curities decision, and all that it may work, 
still the weight not only of public opinion 
but also of legal acceptation seems to be 
with it, and what it fairly means. The sud- 
den elimination of existing competition, 
without asking leave of anybody, which the 
holding corporation brings about, is still re- 
garded by the mass of men as a social 
danger. Moreover, from a technical point of 
view, the Securities decision appeals to the ma- 
jority of lawyers, although there are various 
dissenters. Indeed, to a reflecting lawyer 
the decision against the holding corporation 
logically follows from the decision against 
the trust arrangement. For in both the 
salient fact is that former competitors, still 
existing, are now bound together so that they 
will no longer compete. It will not do to tell 
courts which look into the substance of things 
that there is no direct contract between these 
constituent companies. The fact remains 
that the scheme complained of makes them 
substantially participants in a combination. 
This constitutes an overt combination sup- 
pressing competition, notwithstanding that 
the combination is the work of an interme- 
diate corporation. 



232 THE CONTROL OF THE MARKET 

VIII 

To one writing of the history of this 
long campaign against the trusts in this 
present year, the previous decisions which 
have just been detailed seem all to be lead- 
ing up to the great Standard Oil decision, 
just announced after long consideration by 
the Supreme Court in the last term. In the 
Standard Oil prosecution there was shown 
such a combination as to eliminate all possi- 
bility of competition. Indeed, through the 
New Jersey holding corporation all of the 
operations of the constituent companies were 
so centralized that the business was con- 
ducted practically as that of one concern with 
divers departments. It is needless to rehearse 
the facts. Every reader of our periodicals 
knows more about the rise of the Standard 
Oil Company than of that of any dynasty 
in all history; and, indeed, the rise of the 
Standard Oil Company is one of the most 
interesting stories in economic history. 
Despite all that was said in its behalf, the 
Supreme Court was unanimously of the 
opinion that its organization was in flagrant 
violation of the Sherman Act. Hitherto the 
Standard Oil concerns have survived litiga- 



THE ANTI-TRUST STATUTE 233 

tion in some form or other, but now without 
the consent of the law this combination can- 
not any longer perpetuate its monopoly as 
its designers planned it. 

The most important point in the decision 
was the insistence upon the doctrine that not- 
withstanding the sweeping language against 
schemes to restrain trade in the Act, it is 
only unreasonable restraint that is meant. 
This is but following the w r ell recognized 
canon of statutory interpretation that, in 
construing a statute using common law 
phrases, these shall receive their common law 
meaning. Now, the common law against 
restraint of trade, from time immemorial, as 
has been seen, has distinguished between 
undue restraints and reasonable arrange- 
ments. As the Supreme Court now appre- 
ciates, it should have thus construed the 
Sherman law from the outset. 

In the Standard Oil case the Supreme 
Court (all but the radical Harlan) frankly 
disavowed this dictum in wise and states- 
manlike language sanctioned by every prin- 
ciple of law and justice. " Not specifying 
but indubitably requiring a standard," said 
the Chief Justice, " it follows that it was 
intended that the standard of reason which 



234 THE CONTROL OF THE MARKET 

had been applied at the common law and 
in this country in dealing with subjects of 
the character embraced by the statute, 
was intended to be the measure used for 
the purpose of determining whether in a 
given case a particular act had or had not 
brought about the wrong against which the 
statute provided." 

The Standard Oil case thus will stand 
in the history of this long campaign against 
the trusts as establishing the sound doctrine 
of reasonableness. By the enforcement of 
this standard the " good " trusts may ulti- 
mately be separated from the "bad"; for 
there is a long course of judicial decisions 
dating back to the mediaeval year-books dis- 
tinguishing illegal restraint from reasonable 
arrangements. Those who have faith in the 
essential justice of our common law will 
wish no amendment of the Sherman Act, now 
that it has adopted the common law standard. 



IX 

In the later Tobacco decision of this memo- 
rable year, we have a fuller revelation of the 
new trust policy. What is in violation of the 
trust law is now become a question of sub- 



THE ANTI-TRUST STATUTE 235 

stance rather than of form. Mere combina- 
tion is no longer wrong in itself — it is mo- 
nopolization which the law seeks to prevent. 
Those who are enlarging their business in 
normal ways need no longer fear the trust 
law; it is the abnormal policy of driving 
others out of the business which must be 
abandoned. As the Supreme Court has just 
said, in view of the general language of the 
statute and the public policy which it mani- 
fests, there is no possibility of frustrating 
that policy by resorting to any disguise or 
subterfuge of form, since resort to reason 
as the standard renders it impossible to escape 
by any indirection the prohibitions of the 
law. We are to be governed by this rule 
of reason thenceforth in any judicial deter- 
mination as to the character of any com- 
bination the legality of which is brought 
in issue. 

As for the Tobacco Trust itself, it would 
be hard for anyone not retained by it to 
defend its practices so often laid bare in con- 
temporary litigation. Its history is one of 
combination upon combination, of scheme 
after scheme to secure its market and that of 
its competitors by fair means or foul. It was 
the undoubted policy of those who were in 



236 THE CONTROL OF THE MARKET 

control to make it impossible for anyone else 
to do any considerable business in their 
territory or within what they considered their 
sphere of influence. Smoking tobacco and 
chewing tobacco, cigarettes and cigars, stogies 
and snuff, tinfoil and licorice — they bought 
out the principal companies engaged in these 
lines and forced out the others. The most 
ruthless of their policies was their insistence 
upon exclusive dealings; they would often 
practically refuse to sell their long-estab- 
lished brands (which a retailer must have in 
stock) to any dealer who carried the goods 
of a competitor. 

Again, if they decided to enter a new 
field, as when they took on plug tobacco, they 
would not hesitate to lose millions in under- 
selling to accomplish the ruin of those recal- 
citrant firms which would not come in. The 
tobacco decision at least teaches what prac- 
tices to avoid. People who have still the 
older notion of industrial freedom may not 
be shocked by this recital. But according to 
modern ideas such predatory tactics are pun- 
ishable offenses against the industrial peace. 
Such schemes conclusively establish the de- 
liberate purpose to restrain the freedom 
of a trade by monopolizing it. And it 






THE ANTI-TRUST STATUTE 237 

is against such monopolization that the 
trust law is to be directed primarily hence- 
forth. 

There is always some feature in every note- 
worthy case which prevents one from saying 
that no more was decided than could have 
been predicted. In the Tobacco case this sur- 
prise comes in the final decree. The Supreme 
Court directed the court below to hear and 
advise the parties to the combination for the 
purpose of ascertaining and determining 
upon some plan or method of dissolving the 
combination and re-creating out of the ele- 
ments now comprising it a new condition, 
which shall be honestly in harmony with and 
not repugnant to the law as declared by the 
court. This order is undoubtedly the salient 
feature of the Tobacco decision. It is most 
unusual for courts to undertake to show 
parties how they may conform with the law; 
but destructive measures are giving way to 
constructive policies. One must not, however, 
expect too much; there must be other deci- 
sions before we shall know with real cer- 
tainty what is reasonable and what is un- 
reasonable. But by adopting this policy of 
taking charge of the reorganization, the 
courts will let us know what their distinction 



238 THE CONTROL OF THE MARKET 

is to be years before we could know it through 
the ordinary course of decisions. 



The Supreme Court has therefore prom- 
ised us that we are to have the rule of reason 
henceforth in enforcing the anti-trust law. 
Very probably we shall have more legislation 
on the subject of the trusts, but the lines 
upon which this legislation will proceed have 
been laid down by the courts already. Fed- 
eral registration or incorporation, if it comes, 
will simply protect a trust in acting reason- 
ably. Federal control or regulation, if it 
comes, will see to it that the good trusts are 
not punished with the bad. The proof that 
this is a practicable programme may be 
found in the fact that the Supreme Court 
has from the beginning acted upon this 
principle, while professing up to this year 
not to be free to be reasonable in enforcing 
the law. The Supreme Court has never 
decided against any combination which the 
great majority of people have not felt de- 
served its fate. The Trans-Missouri Freight 
Association, the Addystone pipe pool, the 
Northern Securities Company, the Chicago 



THE ANTI-TRUST STATUTE 239 

packers, the railway strikers, the Federated 
boycotters — one and all so defied public opin- 
ion that few persons could be found who 
would defend their conduct as reasonable. 
In ordering the dissolution of Standard Oil 
and American Tobacco this year, the Su- 
preme Court has simply passed sentence on 
two of the most notorious offenders against 
our industrial peace, long ago found guilty 
by the country. If, then, the Supreme Court 
has in fact only decided against the most out- 
rageous trusts in the past, need any concern 
which is acting reasonably have fear in the 
future? 



NOTE 

The discussion in this chapter has been confined to 
United States Supreme Court cases under the Federal 
Anti-Trust Law. Certain cases in the Federal courts 
which never reached the Supreme Court are too impor- 
tant to ignore altogether. Such as: American Biscuit 
Co. v. Klotz, 44 Fed. 721 (1891); United States v. 
Jellico Coal Co., 46 Fed. 432 (1891); United States v. 
Patterson, 55 Fed. 605 (1893); Chesapeake & O. Fuel 
Co. v. United States, 115 Fed. 610 (1902). 

The cases under the State anti-trust laws have been 
quite similar to those under the Federal law. See — 
Chicago Coal Co. v. People, 214 111. 421 ; Beechley v. 
Mulville, 102 Iowa 602 (1897); State v. Phipps, 50 
Kans. 609 (1893); State v. Fireman's Fund Ins. Co., 
152 Mo. 1; Fire Ins. Co. v. State, 75 Miss. 24 (1897); 
People v. Sheldon, 139 N. Y. 251 (1893); State v. 
Buckeye Pipe Line Co., 61 Oh. St. 520 (1899); State v. 
Virginia-Carolina Chemical Co., 71 S. C. 544 (1904); 
State v. Witherspoon, 115 Tenn. 138 (1905); Waters- 
Pierce Oil Co. v. State, 19 Tex. Civ. App. 1 (1898). 



241 



CHAPTER XI 

RELIEF AGAINST PREDATORY COMPETITION 



Our law reports during the last two dec- 
ades have furnished us abundant evidence 
of the industrial wrongs that the trusts are 
perpetrating. What those who bear the brunt 
of these new conditions feel most strongly 
is the discriminations that these great cor- 
porations make in their dealings. These 
predatory raids which the robber trusts make 
into the field of peaceful competition raise 
the chief outcry against them. And this just 
complaint will not be stopped by pointing 
out that this sort of thing has been done all 
along by men in ordinary businesses, and has 
not been held unfair. This may be said to 
be the most important of the recent discov- 
eries about the potentialities of the trusts, 
that a course of dealing which was fair enough 
in carrying on the former smaller businesses 
is essentially unfair in the conduct of the 
later larger businesses. This is the real 

242 



PREDATORY COMPETITION 243 

explanation of the cases which have already 
been considered to some extent, which pro- 
tected an individual trader against the aggres- 
sions of a combination that brought coercion 
to bear upon his customers. To be sure, 
in competition between individuals it was held 
permissible to threaten a customer that, unless 
he gave his trade exclusively, he would not 
be sold anything. But for a combination to 
make the same statement to customers was 
held to be a legal wrong by the majority 
of cases. Back of all the technique employed 
to explain these cases, lies the idea that it is 
essentially wrong to abuse monopolistic power 
in any such manner. 

ii 

In view of the authorities, it may be pre- 
dicted that the courts are going to do some- 
thing to protect the individual in business 
from such competition by such combinations. 
The will to do this was seen in People v. Duke 
(44 N. Y. Supp. 336), where a lower New 
York Court held that the group of men who 
w r ere in control of the American Tobacco 
Company could be held guilty of criminal 
conspiracy, if it could be shown that they were 
attempting to monopolize the tobacco busi- 



244 THE CONTROL OF THE MARKET 

ness by coercing and compelling dealers and 
jobbers to deal exclusively in the goods of 
their company. Upon the general issue 
Judge Fitzgerald said: " A trading corpora- 
tion is entitled to all the advantages it can 
secure under fair and free competition, but 
its officers and agents may become criminally 
liable if they confederate to secure a monopoly 
by threats and menaces directed against 
competitors, to force and coerce them to re- 
linquish the rights to the fullest enjoyment 
of which all are entitled. If, then, the proof 
in the case at bar should establish the allega- 
tions of the indictment, might not the re- 
fusal to sell to jobbers and dealers except 
upon the required conditions, be properly 
found to constitute menace, coercion, and 
intimidation? And if such methods or de- 
vices were resorted to by defendants to re- 
strain lawful trade and commerce, and 
create a monopoly, are they not guilty of con- 
spiracy? " 

In Massachusetts recently legislation was 
passed making it a criminal offense to make 
it the condition of the sale of goods that 
the purchaser should not sell or deal in the 
goods of any person other than the seller. 
In holding this restrictive legislation to be 



PREDATORY COMPETITION 245 

within the police power (Commonwealth v. 
Strauss, 191 Mass. 545), the Chief Justice 
of Massachusetts said, for his court: "We 
may infer that the Legislature was providing 
for cases in which this particular kind of 
contract would be unfair competition as 
against weaker dealers, and would be in- 
jurious to the public as tending to crush 
ordinary competitors, and thus create a mo- 
nopoly, from which the community as con- 
sumers would ultimately suffer. If, at the 
time of the enactment of this statute, there 
were dangers of this kind confronting the 
people of this Commonwealth, and if this 
prohibition is a reasonable way of averting 
such dangers, we find justification for the 
legislation unless it involves a serious injury 
to those who are restrained by it." 



in 

The Federal Anti-Trust Law, as will have 
been noted, declares against two kinds of in- 
dustrial wrongs, which it is very difficult to 
separate, as they commonly appear together. 
Not only does it declare against combination 
in restraint of trade, but also, if its clauses 
be sufficiently analyzed, it will be seen that 



246 THE CONTROL OF THE MARKET 

it declares against monopolization by anyone. 
The emphasis was formerly placed upon the 
first of these sections, but now it has ap- 
parently been shifted to the second. Per- 
haps this will finally result in showing that 
the statute is in true balance, the restraint 
of trade necessarily involving monopolization. 
It is restraint of trade that the law de- 
clares against. The act has nothing to say 
against the mere curtailment of competition. 
Monopolization was adverted to by the 
Supreme Court in the famous Wallpaper 
case of a few years ago (212 U. S. 227). 
The Continental Wallpaper Company, it ap- 
peared, had concentrated into its control all 
the business of more than thirty wallpaper 
concerns producing upwards of 98 per cent, 
of the wallpaper in the United States. To 
perpetuate the monopoly, which had thus been 
acquired, all jobbers in their purchases were 
virtually compelled to sign a jobbers' agree- 
ment which bound them to buy from the 
Continental Company all the wallpaper they 
should handle at certain prices, and not to re- 
sell except on certain conditions. If the job- 
ber should not buy of others, and should ad- 
here to the conditions named, he would get 
a rebate from the purchase price originally 



PREDATORY COMPETITION 247 

charged, so startling a reduction as to make 
it plain that the original price was a fictitious 
price, and the loss of the rebate virtually a 
penalty for breaking away from the monopo- 
listic scheme. The Supreme Court would not 
therefore hold a jobber to the contract price 
for goods sold him, Mr. Justice Harlan sum- 
marizing the reasons of throwing it out of 
court briefly: "The plaintiff comes into 
court admitting that it is an illegal com- 
bination whose operations restrain and mo- 
nopolize commerce and trade among the 
states, and asks a judgment that will give 
effect, so far as it goes, to agreements that 
constituted that combination, and by means 
of which the combination proposes to accom- 
plish forbidden ends. We hold that such a 
judgment cannot be granted without depart- 
ing from the rule long established in the 
jurisprudence of both this country and Eng- 
land, that a court will not lend its aid in 
any way to a party seeking to realize the 
fruits of an agreement that appears to be, 
tainted with illegality, although the result 
of applying that rule may sometimes be to 
shield one who has got something for which, 
as between man and man, he ought perhaps 
to pay, but for which he is unwilling to pay." 



248 THE CONTROL OF THE MARKET 

In the Standard Oil case of this year, the 
Chief Justice in his opinion has made it plain 
that the Supreme Court believes that both of 
the principal sections of the Sherman Act 
are to be taken together, the first clause 
against combination and the second clause 
against monopolization. The second section 
he says was intended to supplement the first, 
and to make sure that by no possible guise 
could the public policy embodied in the first 
section be evaded. Having in the first sec- 
tion forbidden all means of restraining trade, 
the second section, according to the Chief 
Justice, seeks, if possible, to make the pro- 
hibition of the act the more complete by em- 
bracing all attempts to reach monopoly, even 
though the acts by which such results are 
brought about be not embraced within the 
general enumeration of the first section. 
" And it is worthy of observation," continues 
the Chief Justice, " that although the statute 
by the comprehensiveness of the enumerations 
embodied in both the first and second sections 
makes it certain that its purpose was to pre- 
vent undue restraints of every kind or nature, 
nevertheless, by the omission of any direct 
prohibition against monopoly in the concrete, 
it indicates consciousness that the freedom o£ 



PREDATORY COMPETITION 249 

the individual right to contract, when not un- 
duly or improperly exercised, was the most 
efficient means for the prevention of mo- 
nopoly, since the operation of the centrifugal 
and centripetal forces resulting from the 
right to freely contract was the means by 
which monopoly would be inevitably pre- 
vented if no extraneous or sovereign power 
imposed it, and no right to make unlawful 
contracts having a monopolistic tendency were 
permitted." 

IV 

To what extent this regulation by law 
should go is indicated by the great abuses of 
their powers which the cases which have been 
decided have disclosed. It is plain that the 
law is primarily directed now against exclu- 
sive policies. For example in the case of 
Montague & Co. v. Lowry (193 U. S. 38), 
the Supreme Court confirmed a judgment for 
treble damages in favor of a dealer in tiles 
who had been greatly injured in his business 
by the machinations of a dealers' association, 
membership in which was refused him. It 
appeared that this dealers' association had 
adopted the policy of refusing to sell to any 
dealers not members for less than the retail 



250 THE CONTROL OF THE MARKET 

price, while the manufacturers of tiles asso- 
ciated with them agreed not to sell to persons 
not members at any price. As the court 
pointed out, this was not the simple case of a 
refusal to deal with a customer, it was the 
action of a combination bent upon perpetuat- 
ing its monopoly by bringing pressure upon 
others to prevent them from dealing with a 
rival dealer. The object of what was done 
was plainly to gain monopoly by excluding 
others. And for the disastrous effects of 
this policy to the business of the inde- 
pendent dealer the court held he had legal 
redress. 

In the Patent Medicine case, recently de- 
cided by the Supreme Court (220 U. S. 373), 
this point is even more strongly made. There 
was shown in evidence in this case a system 
of contracts between manufacturers of patent 
medicines and wholesale and retail dealers, 
by which the manufacturers planned to con- 
trol the prices at which the medicines should 
be sold at wholesale and at retail, so that there 
would be no possibility of price cutting at 
any stage. As an aid to the maintenance of 
the prices thus fixed the company devised a 
system of tracing and identifying through 
serial numbers each wholesale and retail pack- 



PREDATORY COMPETITION 251 

age of its products. The Supreme Court, 
being convinced that the various contracts 
were all parts of a general scheme to destroy 
competition, held that the contracts were void- 
able at the option of a dealer who had bought 
the goods with the agreement to maintain the 
price named. Once the product is sold, said 
the court succinctly, the public is entitled to 
whatever advantage may be derived from 
competition in the subsequent traffic. 



Two cases in the state courts of late will 
serve to bring out the present unfairness in 
the trust competition in a striking way. In 
Standard Oil Company v. Doyle (118 Ky. 
622) there were extraordinary allegations of 
unfair competition made by a competitor of 
the Standard Oil Company against it. He 
alleged that, after he had successfully estab- 
lished a local business, a special representative 
of the company was sent to destroy it. A 
local wagon line was established; and the 
drivers of these wagons were apparently in- 
structed to follow the wagons of the inde- 
pendent concern, the drivers of the Standard 
wagons even following the other drivers into 



252 THE CONTROL OF THE MARKET 

the houses and stores where the independent 
concern was selling, offering to sell oil and 
gasoline at reduced rates or practically for 
nothing. Moreover, threats were made 
against customers of the independent concern 
that they would be put out of business if they 
continued to deal with it; and various other 
methods were employed to destroy the credit 
of the independent concern and estrange its 
customers. In holding this to be unfair com- 
petition, Mr. Justice Nunn said: " It was 
most assuredly unlawful to obstruct, harass, 
and annoy appellee's employees when en- 
gaged in the discharge of their duties in sell- 
ing and distributing oils to appellee's cus- 
tomers; to threaten customers of appellee to 
shut them up in their business if they con- 
tinued to deal in appellee's oils; to cause and 
procure false and injurious reports concern- 
ing appellee and his business to be circulated 
in Lexington and vicinity; and to procure 
appellee's arrest and prosecution on false 
charges in connection with his business in the 
sale of oils, the purpose of estranging and 
alienating the acquaintances, customers and 
patrons of appellee." There is too much on the 
records of courts against the Standard Oil 
Company to let one believe all its protesta- 



PREDATORY COMPETITION 253 

tions of the advantages of a benevolent 
despotism. 

In Cilley v. United Shoe Machinery Com- 
pany (152 Fed. 726) it was alleged that this 
corporation was monopolizing the shoe ma- 
chinery business of the United States by com- 
pelling shoe manufacturers throughout the 
United States, in leasing shoe machinery from 
it, to agree to use no other shoe machinery in 
their respective factories except that made by 
it. Cilley further alleged that he was the 
manufacturer of a certain machine used in 
making shoes, but that by reason of these 
exclusive contracts manufacturers throughout 
the United States who would otherwise have 
bought from him were prevented from doing 
so. He urged that he had been thus deprived 
of the open market to which he w T as entitled 
as the maker of a meritorious machine; and 
he asked damages for this loss of business 
and depreciation of his property. The Fed- 
eral Court unfortunately did not discuss his 
complaint on its merits. It was thrown out of 
court primarily because the complaint was 
not sufficiently definite. That this controversy 
between this corporation and its competitors 
is settled, no one really believes who follows 
the current news. 



254 THE CONTROL OF THE MARKET 

VI 

It is sufficiently plain that dealers who are 
damaged in their business by the exclusive, or 
rather excluding, policies of the trusts may 
bring action against these combined concerns 
for the recovery of such damages so inflicted. 
One of the most striking cases of this under 
the state anti-trust laws is Cleland v. An- 
derson, a Nebraska case (66 Neb. 252). It 
appeared in that case that a lumber dealer 
had been driven out of the lumber business 
by force of threats made by members of a 
lumber dealers' association to wholesale lum- 
ber dealers, of whom this particular dealer 
had been purchasing. It appeared that the 
principal idea in maintaining this association 
was to prevent the members of the association 
from being subjected to competition from 
dealers who were not members. And it 
further appeared that the wholesale dealers 
made " honorary members " were subjected to 
fines if they sold to retailers not " regular." 
In holding that the attack of this combination 
upon the dealer constituted a legal wrong 
for which recovery could be had under the 
statute, Pound, Commissioner, said: "Com- 
binations and conspiracies in restraint of 



PREDATORY COMPETITION 255 

trade are unlawful and actionable at common 
law, and it has been held that combinations 
between independent dealers which have the 
effect of preventing competition are within 
that rule without regard to what may be done 
in pursuance of them, and although the object 
is merely to protect against ruinous rivalry 
without any attempt to charge undue and ex- 
cessive prices. While persons have a right to 
withdraw their trade from whom and as they 
please, they have no right to unite in restraint 
of competition; and when they go beyond 
mere withdrawal of business and employ 
coercion or intimidation to prevent free deal- 
ing a different question is presented." 

A strong opinion to the same effect was 
recently handed down in Illinois: Purington 
v. Hinchliff (219 111. 159). In this case a 
manufacturer and dealer in bricks was injured 
by the operation of an agreement between a 
brick manufacturers' association, a builders' 
association and a bricklayers' union, that they 
would not use, purchase, or lay bricks made 
by any concern which had not subscribed to 
the rules of the builders' association. In hold- 
ing this to be an unlawful conspiracy against 
this manufacturer, Mr. Justice Wilkin said: 
" No person or combination of persons can 



256 THE CONTROL OF THE MARKET 

legally, by direct or indirect means, obstruct 
or interfere with another in the conduct of 
his lawful business, and any loss willfully 
caused by such interference will give the 
party injured a right of action for all 
damages sustained. All parties to a con- 
spiracy to ruin the business of another be- 
cause of his refusal to do some act against 
his will or judgment are liable for all overt 
acts illegally done pursuant to such conspiracy 
and for the subsequent loss, whether they were 
active participants or not." 



VII 

If the present emphasis upon monopoliza- 
tion as the gist of the wrong continues, the 
law will very probably, in distinguishing be- 
tween what is unreasonable and what is reason- 
able, take the distinction which has been es- 
tablished in Rhode Island. In that state the 
whole law turns upon whether monopolization 
is shown or not. This court said recently in 
the Coal Case (29 R. I. 254) : " Although the 
list of common-law offenses in this State may 
be said to include that of engrossing, our his- 
tory does not disclose any prosecutions made 
thereunder; it may therefore be considered as 



PREDATORY COMPETITION 257 

dormant, but ready to be called into activity 
whenever the occasion may require. When it 
becomes necessary, the law relative to engross- 
ing in this state will be applied, with due 
regard to the circumstances and conditions 
existing at the time of its enforcement. The 
danger to be apprehended from engrossing 
is monopoly. A monopoly, as now under- 
stood, " embraces any combination the tend- 
ency of which is to prevent competition in 
its broad and general sense and to control 
prices to the detriment of the public." 

But the court approved the language of an 
earlier case (18 R. I. 484) where it was in- 
sisted that monopolization must be shown: 
" Undoubtedly there may be combinations so 
destructive of the right of the people to buy 
and sell and to pursue their business freely 
that they must be declared to be void upon 
the ground of public policy. In such cases 
the injury to the public is the controlling con- 
sideration. But it does not follow that every 
combination in trade, even though such com- 
bination may have the effect to diminish the 
number of competitors in business, is there- 
fore illegal. Such a rule would produce 
greater public injury than that which it 
would seek to cure. It would be imprac- 



258 THE CONTROL OF THE MARKET 

ticable. It would forbid partnerships and 
sales by those engaged in a common business. 
It would cut off consolidations to secure the 
advantages of united capital and economy of 
administration. It would prevent all restric- 
tions and exclusive privileges, and hamper the 
familiar conduct of commerce in many ways. 
There may be many such arrangements which 
will be beneficial to the parties and not in- 
jurious to the public. Monopolies are liable 
to be oppressive, and hence are deemed to be 
hostile to the public good. But combinations 
for mutual advantage which do not amount 
to a monopoly, but leave the field of com- 
petition open to others, are neither within the 
reason nor the operation of the rule." 

VIII 

Despite the protests of the managers of the 
trusts, that prices have been lowered under 
their auspices, there is a growing suspicion 
of overcharging. At all events it would be 
comforting to believe that the law could reach 
outrageous cases of overcharging. On this 
point there is a significance in the decision 
of the United States Supreme Court in 
Chattanooga Foundry Co. v. Atlanta (203 



PREDATORY COMPETITION 259 

U. S. 390) which has not generally been ap- 
preciated. In that case it was held that the 
city could recover from the foundry the 
amount it was compelled to pay the foundry 
for iron pipe above what it was worth. The 
purchase was made, after a simulated com- 
petition, at a price fixed by the trust of which 
the foundry was member. It was held that 
the loss to the city was within the Sherman 
Anti-Trust Law. Said Mr. Justice Holmes, 
" A person whose property is diminished by 
a payment of money wrongfully induced is 
injured in his property." It is good to see 
that the Supreme Court appreciates that over- 
charging by a monopoly works a definite 
legal wrong for which redress may be had. 

Discrimination in price may also come 
within the ban of the law where that dis- 
crimination is put in force as part of a 
scheme to monopolize, as has been seen in 
many cases already. One more may be added* 
Aikens v. Wisconsin (195 U. S. 194). In 
this case the extraordinary facts appeared 
that a combination of newspapers, to prevent 
a rival paper from raising its rates, announced 
that they would charge similarly advanced 
rates to merchants who paid these advanced 
rates, while continuing to charge its adver- 



260 THE CONTROL OF THE MARKET 

tisers generally their regular rates. Proceed- 
ings were brought against the combination 
under the Wisconsin statute for criminal con- 
spiracy. In point of constitutionality the case 
was taken to the Supreme Court of the 
United States, where the conviction was sup- 
ported. Said Mr. Justice Holmes: " It would 
be impossible to hold that the liberty to com- 
bine to inflict mischief is among the rights 
which the Fourteenth Amendment was in- 
tended to preserve." With these two cases 
in mind one can assert confidently that legis- 
lation providing further remedies for over- 
charging and discrimination by the trusts 
would be held constitutional. 



IX 

Regulation — not destruction — will soon be 
shown to be the policy of the twentieth cen- 
tury. No enlightened person could wish to 
see the industrial progress which these great 
combinations have fostered set back. Rather 
upon economic grounds these efficient organi- 
zations should be turned to the common good. 
From this point of view these continual at- 
tacks by which the dissolution of particular 
trusts is successively attempted, have no 



PREDATORY COMPETITION 261 

policy behind them that will eventually be 
justified, aside from that of driving the trusts 
into organizing in the final form of a single 
corporation. Perhaps for the present, when 
the proper method of legal regulation has 
not been worked out, it is necessary to visit 
this punishment upon those trusts which out- 
rage public opinion. But very soon the time 
will come when the principal trusts will have 
fully reorganized as single corporations. And 
then the fundamental problem of legal regu- 
lation must be squarely faced. Laissez faire 
has unquestionably permitted great abuses by 
these industrial combinations which it encour- 
aged. State control is therefore now indis- 
putably necessary, however much it may be 
opposed by those who had their ideas fixed 
under the older regime. 

What has been attempted in this book is 
to follow the course of the development of 
the policy of the law from the recent past 
into the near future. There are those who 
believe that the solution will come, not by such 
development in the common law, but by new 
legislation of a different sort. But let them 
remember that legislation which is out of 
touch with the existing law usually comes to 
naught. It is not impossible for the Legis- 



262 THE CONTROL OF THE MARKET 

lature to make legal that which has always 
been held by men of our race in modern 
times to be illegal, an unreasonable combina- 
tion in restraint of trade — but it is improb- 
able. It is not impossible that the Executive 
may be given a power to dispense with law 
in favor of good trusts — but it is almost un- 
thinkable. This dispensing power to those 
who are good, as a rebuke to those who are 
thought to be bad, is not, to a lawyer, a 
practicable substitute for general regulation 
of all trusts, good and bad. Under proper 
regulation the trusts which are found to be 
acting reasonably will not be disturbed, while 
those which are acting unreasonably will be 
summarily dealt with. If the common law 
is as well developed as the writer believes, 
no new substantive law is needed. But Con- 
gress may well provide better methods for its 
enforcement, such as the Interstate Trade 
Commission which has been proposed recently. 
Let it not be said that the administration 
has too great powers, which it is likely to 
abuse. There is proof enough that it is a 
workable programme in the fact that the 
successive administrations, with full authority 
from the Supreme Court in that early dic- 
tum to cause punishment to be imposed upon 



PREDATORY COMPETITION 263 

almost any large corporation in the land, have 
never invoked the statute against any com- 
bination which was not beyond question an 
illegal combination by the common law dis- 
tinction which the court has now adopted. 
The time has come for the recognition of the 
permanence of these great aggregations of 
capital as such. It would be a grave mis- 
take, from an economic point of view, to 
force the dissolution of the corporate 
organizations which, without abusing their 
power, now control many industries. It may 
even be hoped that the time will soon come 
when it may be seen that these effective 
concerns may work for the common good. 
It is high time that the old policy directed to 
the impossible end of destroying the trust 
should make way for the new idea to regu- 
late the business conduct of these great in- 
dustries. Regulation — not destruction — 
should be the programme of the future. 

It has indeed been a long campaign which 
the law has been waging against the trusts. 
And it has been conducted with varying for- 
tunes. It is a matter of flow and flux, as is 
the nature of progress. We think we know 
the limits of the application of the law to-day 
in reading this latest decision. But, if the 



264 THE CONTROL OF THE MARKET 

history of this matter is to teach us anything, 
it is that one never can be sure of the future. 
However, all that enterprising men want is 
reasonable certainty to go ahead on; and this 
they have in the decisions of this year. He 
who is not willing to risk his fortunes upon 
fair probabilities has no place in the higher 
realms of American business. Peace we may 
have for a time with these latest decisions in 
evidence. But it is an armed peace without 
immediate prospect of final disarmament. 
For this present century at least there can 
be no long respite from social warfare, 
helium omnium contra omnes. 

x 

It is very likely that the problems which 
have been discussed in this chapter will receive 
greater attention in the immediate future than 
they have hitherto. Unquestionably we are 
going to have law enough to redress the wrongs 
done others in business by the monopolistic 
concerns. It should be the abuse — not the 
possession — of monopoly which will subject a 
concern to prosecution under the law in the 
future. The essence of the wrong of mo- 
nopolization is the exclusion of others from 
the market, not mere growth of the concern 



PREDATORY COMPETITION 265 

itself. In other words, it is unnatural growth 
by unreasonable tactics which will be pun- 
ished, not natural growth by deserved success. 
Monopolization by exclusive policies and un- 
justifiable discriminations is the thing to be 
prevented. With an open market a rival con- 
cern may succeed on its merits, but not if the 
trusts are allowed to control the market. If 
this opportunity is preserved, there will be al- 
most protection enough against any injury to 
the public, if not by competition itself, by the 
potentiality of competition. If unfair com- 
petition is forbidden, fair competition will al- 
ways be possible. The market should be so 
free from unnatural restraints that by natural 
competition one may always succeed. 



NOTE 

For other examples of suits brought under the Fed- 
eral anti-trust statutes by a competitor injured by the 
force of the monopoly, see — Rice v. Standard Oil Co., 
134 Fed. 464 (1905); Loder v. Jayne, 142 Fed. 1010 
(1906). 

The decisions under the State anti-trust laws are to 
the same effect, see — Finck v. Schneider Granite Co., 
187 Mo. 244 (1904); Straus v. Am. Publishers' Ass'n, 
177 N. Y. 473 (1904), 



267 



CHAPTER XII 



EXTENT OF STATE CONTROL 



All businesses affected with a public inter- 
est are subject to State control in a peculiar 
degree. Whether a business is public or not 
depends in last analysis upon the situation 
of the public with respect to it. Are there 
enough of such purveyors to serve the pub- 
lic? or are there, for permanent reasons, never 
enough? If so, there will be virtual competi- 
tion; if not, there will be virtual monopoly. 
It will be found that in many of the great 
businesses such competition, although from a 
legal point of view possible, is from the 
economic point of view improbable. So far 
as one can see, virtual competition is at an 
end in these industries, and virtual monopoly 
will henceforth prevail. Therefore it must be 
said that the public has now an interest in the 
conduct of these businesses by their owners. 
They are affected with a public interest, since 



EXTENT OF STATE CONTROL 269 

these agencies are carried on in a manner to 
make them of public consequence. Having 
devoted their property to a use in which the 
public has an interest, they in effect have 
granted to the public an interest in that use, 
and must submit to be controlled by the pub- 
lic for the common good to the extent of 
the interest they have created. Plainly we 
have in the accepted use of these phrases the 
manifestation of a deep-seated change in 
habits of thought. Only twenty-five years 
ago the general feeling as to every sort of 
industrial relation was that it was better to 
leave all alone, that it was better to leave 
people to work out their own salvation. But 
of late years we have been calling upon the 
State to save us from monopoly in all its 
forms; and we are impatient if it delays. 



ii 

In recent times there undoubtedly is an 
increasing need of this stricter regulation of 
all employments which appear to be affected 
with a public interest. The most of men 
appreciate that the law has already taken con- 
trol of the situation for all time. It is hardly 
too much to say that the efficient regulation 



270 THE CONTROL OF THE MARKET 

of the monopolistic concerns by sufficient law 
is the most pressing problem confronting this 
nation. Great power brings as its conse- 
quence the need of control of that power for 
the good of the whole people. It is urged 
that the time has come when extension of the 
law and enforcement of it should be the 
avowed attitude of all conservative persons 
who wish the perpetuation of present condi- 
tions. 

It would be well if the restless and the 
doubting who see many abuses and many 
wrongs in the conduct of the great monopolies 
without prompt remedy or adequate redress, 
might be relieved and heartened by being 
shown that the common law is adequate to 
deal with all real industrial wrongs, and that 
with the aid of remedial statutes the adminis- 
tration of the law can be relied upon. The 
proprietors of these great businesses should 
be told sharply that they may not adopt to 
the prejudice of their public various profitable 
policies, and then justify them as inherent 
rights which other men in ordinary business 
may use in the advancement of their interests. 

All businesses both great and small are sub- 
ject, to be sure, to that general police power 
of the State whereby in any civilized society 



EXTENT OF STATE CONTROL 271 

the effort is made to so order things that one 
may not use his own so as to injure another. 
But the comparison of the large amount of 
regulation which it is considered proper for 
the State to impose upon a monopolized 
business with the small amount of regulation 
which it is considered proper for the State to 
enforce in regard to competitive business is 
in itself significant enough. The difference 
which is shown is more than one of degree; it 
becomes one in kind. In the ordinary business 
where regulation by competition is still suffi- 
cient, the law cannot question the decision 
of the proprietor to refuse to sell to a par- 
ticular applicant, or to discriminate in his 
prices. But where the business is in the hands 
of a monopolistic combination, refusal to sell 
may become conspiracy, and discrimination 
may be held illegal. 

in 

There is now fortunately almost general 
assent to State control of the established mo- 
nopolies. Two ways only can be found to 
exercise such control. One way is govern- 
ment ownership. The other way is the con- 
trol of their practices. One or the other of 
these methods must be finally adopted. The 



272 THE CONTROL OF THE MARKET 

conservative method is now on trial. It be- 
hooves us to see to it that it be so intelli- 
gently tried, and that the law applicable to 
the case be so accurately enforced, that we 
may not be driven perforce to the radical 
alternative of public ownership. If govern- 
ment ownership should be made necessary by 
the failure of State regulation, we should be 
face to face with socialism. For that a people 
once accustomed to seeing all great business 
operated by the government would be stopped 
by any legal distinction between them and 
ordinary concerns, is too much to hope. 

This principle of State control does not 
lead one to socialism; indeed, it saves one 
from socialism if truly understood. It is only 
in those few businesses where the conditions 
are monopolistic that dangerous power over 
their public has been attained by those who 
have the control. In most businesses the 
virtual competition which prevails puts the 
distributors at the mercy of their public. In 
current opinion the recognition of this dis- 
tinction is manifest. Men are as eager for an 
open market as ever; but they wish the control 
of monopoly to insure it. The demand is for 
freer trade where competition prevails and 
stricter regulations where monopoly is found. 



EXTENT OF STATE CONTROL 273 

So long as virtual competition prevails there is 
no necessity for coercive law, since there is 
then no power over the purchasing public. 
But where in any business virtual monopoly 
is permanently established the people will not 
be denied in their deliberate policy of effectual 
regulation of such public service for the 
common good. 

Only to this extent the individualistic ideal 
of society gives place to the collective policy. 
It is with true appreciation of the real issue 
that we are contending for State control to 
gain individual liberty. It may once have 
been the ideal of industrial freedom that a 
man might do as he pleased with his own; in 
any event that is no longer our notion of 
social justice. It is believed now that with 
increase in power over the particular market 
comes increase in responsibility to the depend- 
ent public. Socialism would destroy all 
private interests in the name of the public; 
regulation would preserve private interests by 
reconciling them with public right. Socialism 
attacks all capital to whatever business it is 
devoted; regulation grapples monopoly only 
when it is convinced that there is no 
other way to safeguard the interests of the 
public. 



274 THE CONTROL OF THE MARKET 

IV 

It seems to the writer that these occasional 
decisions, in recent years, by which the dis- 
solution of some one great corporation is at- 
tempted in turn, are as futile as the anarchist's 
bomb, and that the programme of destruction 
of these established monopolies is as unin- 
telligent as the terrorist propaganda. No 
thinking person, for example, would wish to 
see the American steel industry revert to scat- 
tered forges. This is especially true, as it is 
quite probable that what evils there may be 
in the conduct of the present company could 
be met by effective regulation of its dealings 
of the sort to which monopolies have been 
subjected from time immemorial. No one 
proposes to abolish gas companies because 
they usually have a monopoly; but everyone 
agrees that such companies should be com- 
pelled to serve all that apply with adequate 
facilities for reasonable compensation and 
without discrimination. And this law is al- 
ways ready to include new businesses within 
its scope, as it did unhesitatingly in the case 
of the electric companies, for example. 

It is not pretended that all that is urged in 
this book should be taken as established in 



EXTENT OF STATE CONTROL 275 

the present law. It is put forth seriously by 
one somewhat versed in the whole subject 
as a working hypothesis, that the solution of 
the trust problem may be found in the law 
governing the public callings. It is contended 
that the operations of the greatest of these 
trusts have become of such public conse- 
quence as to affect them with a public interest 
within the meaning of the law. Moreover, 
these trusts have, in their control of their re- 
spective markets, an assured permanence from 
the conditions prevailing, so that they are not 
to be dispersed as those trade combinations 
which are aiming at temporary cornering of 
the market may be. These great industrial 
organizations should not be swept away by 
dissolution of these new corporations. It is 
rather to be desired upon social grounds that 
these effective producers in their special fields 
should be turned to the common advantage. 
A sufficient regulation to secure this general 
good, it is submitted, is to be found in the 
law governing public employment, which re- 
quires, with elaborate detail for the enforce- 
ment of the general principles, that those who 
conduct a business in which the public has an 
interest serve without discrimination and for 
reasonable compensation. If this law of pub- 



276 THE CONTROL OF THE MARKET 

lie employment could be enforced against 
the industrial trusts, a solution, it may be 
hoped, would be found for the trust problem; 
for it would reach the two complaints most 
seriously made against the trusts — their 
predatory competition and their excessive 
capitalization. 

The impartial enforcement of this pro- 
gramme ought to accommodate all the con- 
flicting interests involved in this issue. The 
legality of these corporations in point of or- 
ganization being fully recognized, the present 
danger from a sudden attack by legal proceed- 
ings which may eventuate in the dissolution of 
the corporation would no longer exist. On the 
other hand, with the prohibition of discrimina- 
tory prices effectively enforced by the admin- 
istration, enough competition would be pre- 
served to modify the monopoly so that the 
right of the State to regulate prices need 
seldom be resorted to. This solution would 
result in an industrial peace, with the con- 
tinual attacks upon the monopolistic cor- 
porations generally abandoned and the 
right of the public, for example, to 
prevent the unfair tactics of that cor- 
poration fully recognized. Regulation even 
to this extent is already sufficiently sue- 



EXTENT OF STATE CONTROL 277 

cessful in dealing with those corporations 
now held to be in public service by reason of 
their virtual monopoly, while under modern 
conditions the attempt at permanent sup- 
pression of industrial concentration in cer- 
tain businesses is really hopeless. The pres- 
ent policy of destruction should be abandoned 
in favor of the programme of regulation. 
The law for regulating the trusts is already 
developed, if only we have the insight to 
realize it. 



THE END 



TABLE OF CASES DISCUSSED 



AIKENS v. WISCONSIN, 259 

ALLEN v. FLOOD, 15, 53, 68 

ARNOT v. PITTSTON & ELMIRA COAL CO., 135 

AVERRILL v. SOUTHERN RY., 22 

AYER v. RUSHTON, 17 



BAILEY v. FAYETTE GAS-FUEL CO., 201 
BAILEY v. MASTER PLUMBERS' ASSOC, 104 
BARR v. ESSEX TRADES COUNCIL, 69 
BENNETT v. DUTTON, 193 

BOHN MANUFACTURING CO. v. HOLLIS, 107 
BREWSTER v. MILLER'S SONS CO., 108 
BROWN & ALLEN v. JACOBS PHARMACY CO., 97 
BRYMER v. BUTLER WATER CO., 203 



CHAMBERS & MARSHALL v. BALDWIN, 40 

CHAPIN v. BROWN BROS., 128 

CHATTANOOGA FOUNDRY CO. v. ATLANTA, 258 

CHICAGO & A. R. R. v. SUFFERN, 192 

CILLEY v. UNITED SHOE MACH. CO., 253 

CLARK v. FRANK, 136 

CLARK v. NEEDHAM, 156 

CLAYGATE v. BATCHELOR, 121 

CLEMMITT v. WATSON, 81 

CLELAND v. ANDERSON, 254 

COLLINS v. LOCKE, 132 

COMMONWEALTH v. STRAUSS, 245 

CONTINENTAL WALLPAPER CO. v. VOIGHT, 246 

CROFT v. DAY, 41 

CRUMP v. COMMONWEALTH, 65 

CUMMINGS v. HYATT, 174 

CUMMINGS v. UNION BLUESTONE CO., 155 

CURRAN v. GALEN, 75 

279 



280 TABLE OF CASES DISCUSSED 

D 

DAVEY v. DAVEY, 44 

DAVIS v. THE PUBLISHING CO., Ill 

DEBS, IN BE, 221 

DELZ v. WINFREE, 103 

DISTILLING & CATTLE FEEDING CO. v. PEOPLE, 162 

DOREMUS v. HENNESSY, 91 

E 
EMERY v. CANDLE CO., 146 
ERDMAN v. MITCHELL, 12 

G 

GLAMORGAN COAL CO. v. MINERS' FEDERATION, 38 
GRAHAM v. ST. CHARLES ST. RY., 21 

H 

HARRIMAN v. NORTHERN SECURITIES CO., 229 
HAUGEN v. ALBINA WATER CO., 173 
HAYS v. PENNSYLVANIA R. R. CO., 197 
HOOVER v. PENNSYLVANIA R. R., 200 
HOPKINS v. GREAT NORTHERN RY., 18 
HOUCK & CO. v. WRIGHT, 137 
HUBBUCK v. WILKINSON, 48 
HUNDLEY v. LOUISVILLE & N. R. R., 90 

I 

ILLINOIS & M. CANAL v. CHICAGO & R. I. R. R., 20 
INDIA BAGGING ASSOC, v. KOCK, 126 
INTERSTATE COMM. v. CHICAGO GT. W. RY., 208 
INTERSTATE COMM v. DELAWARE, L. & W. RY., 209 
INTERSTATE COMM. v. LOUISVILLE & N. RY., 209 

J 
JACKSON v. STANFELD, 96 
JELLIET v. BROADE, 119 

JERSEY CITY PRINTING CO. v. CASSIDY, 54 
JOHN D. PARK CO. v. NAT'L DRUGGISTS' ASSOC, 95 

K 
KEEBLE v. HICKERINGILL, 49 

L 
LOEWE v. LAWLOR, 222 

LONDON GUARANTY & A. CO. v. HORN, 29 
LUCKK v. CLOTHING ASSEMBLY, 71 
LUMLEY v. GYE, 37 



TABLE OF CASES DISCUSSED 281 



M 

MacCAULEY v. TIERNEY, 100 

MALLORY v. HANAUR OIL WORKS, 145 

MARTELL v. WHITE, 109 

MENACHO v. WARD, 193 

MILBANK v. NEW YORK, L. E. & W. R. R., 158 

MILWAUKEE ASSOC, v. NIEZEROWSKI, 129 

MITCHELL v. REYNOLDS, 134 

MOGUL STEAMSHIP CO. v. McGREGOR, 21, 93 

MONOPOLIES, CASE OF, 122 

MONTAGUE & CO., v. LOWRY, 249 

MUNN v. ILLINOIS, 182 

MYLES MEDICINE CO. v. SIMMONS CO., 247 

N 

NATIONAL PROTECTIVE ASSOC, v. CUMMINGS, 79 
NESTER v. CONTINENTAL BREWING CO., 147 
NICHOL v. MARTYN, 41 
NORTHERN SECURITIES CO. v. UNITED STATES, 229 

O 

OAKDALE MFG. CO. v. GARST, 257 

OLD DOMINION STEAMSHIP CO. v. McKENNA, 62 



PACIFIC FACTOR CO. v. ADLER, 124 

PASSAIC PRINT WORKS v. ELY & WALKER CO., 24 

PEOPLE v. CHICAGO GAS TRUST CO., 159 

PEOPLE v. DUKE, 243 

PEOPLE v. NORTH RIVER SUGAR REFINING CO., 149 

PICKETT v. WALSH, 82 

PIERCE v. STABLEMEN'S UNION, 84 

PLANT v. WOODS, 76 

PRIOR OF NEDEPORTS CASE, 13 

PURINGTON v. HINCHLIFF, 255 

Q 

QUINN v. LEATHEM, 67 

R 

RATCLIFF v. WICHITA STOCKYARDS, 183 
REINECKE COAL MINING CO. v. WOOD, 51 
REX v. JOURNEYMEN TAILORS, 60 
ROBINSON v. TEXAS LAND ASSOC, 28 



282 TABLE OF CASES DISCUSSED 



SCHOOLMASTERS' CASE, 12 

SCOTTISH SOCIETY v. GLASGOW ASSOC, 101 

SHEPARD v. MILWAUKEE GAS LIGHT CO., 176 

SILKMAN v. WATER COMMISSIONERS, 198 

SMYTH v. AMES, 205 

SNELL v. CLINTON ELECTRIC CO., 177 

SNOWDEN v. NOAH, 17 

STANDARD OIL CO. v. DOYLE, 251 

STANDARD OIL CO. v. UNITED STATES, 234 

STATE v. ASSOCIATED PRESS, 180 

STATE v. CITIZENS' TELEPHONE CO., 194 

STATE v. NEBRASKA TELEPHONE CO., 179 

STATE v. RHODE ISLAND COAL CO., 256 

STATE v. STANDARD OIL CO., 151 

STOVALL v. McCUTCHEON, 131 



TIFT v. SOUTHERN RY., 208 
TRENTON POTTERIES CO. v. OLIPHANT, 160 
TUSCALOOSA ICE CO. v. WILLIAMS, 127 
TUTTLE v. BUCK, 25 

U 

UNITED STATES v. ADDYSTONE PIPE CO., 225 

UNITED STATES v. AMERICAN TOBACCO CO., 233 

UNITED STATES v. ANDERSON, 220 

UNITED STATES v. HOPKINS, 220 

UNITED STATES v. JOINT TRAFFIC ASSOC, 294 

UNITED STATES v. E. C KNIGHT CO., 219 

UNITED STATES v. SWIFT & CO., 227 

UNITED STATES v. TRANS-MISSOURI ASSOC, 223 

V 

VEGELAHN v. GUNTNER. 16 

W 

WALSH v. DWIGHT, 31 

WALTHAM WATCH CO v. U. S. WATCH CO., 42 

WKSTERN COUNTIES CO. v. LA WES CO., 45 

WHITE v. MELLIN, 46 

WHITTENTON MILLS v. UPTON, 144 

WRIGHT v. CUDAHY, 125 



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